Asian markets started the new quarter on the back foot Friday, trading lower despite better-than-expected China manufacturing surveys, as a reading on Japan's economy disappointed and traders awaited U.S. nonfarm payrolls data later.
"Markets look to be lacking any major stimulus to drive significantly higher," Angus Nicholson, market analyst at spread-bettor IG, said in a note Friday. He said the selloff in European and U.S. markets overnight, coupled with an "awful" Japanese Tankan survey, spurred selling in Asian markets.
"The main concern in the markets appears to be with the U.S. The nonfarm payrolls tonight are important, although few expect the headline jobs numbers to disappoint," he said. "The bigger U.S.-related concern for equities is what is shaping up to be another negative earnings season, a scenario that is likely to weigh on markets globally," he added.
The took a tumble in Friday's session and closed down 3.55 percent, or 594.51 points, at 16,164.16, as markets digested the Bank of Japan's Tankan survey. The survey saw big manufacturers' business sentiment at its lowest in nearly three years, and it's set to weaken in the second-quarter, reported Reuters.
The Tankan "does nothing but highlight the deteriorating economic fundamentals in Japan. This report came in below even the most pessimistic report," Stephen Innes, senior trader at OANDA Asia Pacific, said in a note Friday. "Predictably, the Nikkei has reacted poorly to the print and is dragging the dollar-yen lower in its wake. It signals a disturbingly large drop in business confidence."
The greenback weakened against the yen, with the pair trading at 112.20 at 1:26 p.m. at HK/SIN time, compared with levels as high as 112.59 overnight. A stronger yen is generally bad for Japanese exporters as it makes exports more expensive and reduces the value of repatriated earnings.
Shares of major Japanese exporters were lower; Toyota fell 3.04 percent, while Honda suffered losses of 4.67 percent and Nissan saw a 4.25 percent decline.
South Korea's Kospi closed lower by 1.12 percent, or 22.28 points, at 1,973.57. The export-oriented economy released its March trade data earlier today, with exports and imports showing declines of 8.2 percent and 13.8 percent, respectively.
Chinese markets were mixed, with the closed up 0.17 percent, or 5.0645, at 3,008.979 and the Shenzhen composite closed down 0.56 percent, or 10.694 points, at 1,901.515. Hong Kong's index closed down 1.34 percent, or 277.78 points, at 20,498.92.
The declines came despite better-than-expected manufacturing data from the mainland. China's official manufacturing Purchasing Managers' Index (PMI) came in at 50.2 for March, above a forecast of 49.3 from a Reuters poll, returning to growth for the first time since July.
A similar improvement was seen in the Caixin manufacturing PMI for March, which rose to 49.7 from 48.0 in February, marking the first increase from the previous month in a year. Levels above 50 indicate expansion.
The Caixin survey focuses on smaller and medium-sized enterprises, while the official data target larger companies.
In China's major trading partner Australia, the S&P/ASX 200 index closed down 1.64 percent, or 83.39 points, at 4,999.4. The index was weighed by losses in the energy and materials subindexes, which were down 2.11 percent and 0.25 percent, respectively. The financials sector was also down 2.35 percent.
"Bad debt worries are clearly weighing on Australian banks and the Australian share market," Shane Oliver, head of investment strategy and chief economist at AMP Capital, said in a weekly report.
"While the extra $100 million in bad debt charged announced by [ANZ] due to the resources slump is small, investors naturally worry that the bad debt cycle has now bottomed, and like cockroaches, if there is one downgrade, there are likely to be more," he said.
The Australian dollar/U.S. dollar pair traded up at 0.7679 as of 3:44 p.m. HK/SIN time.
In Australia, resources producers were up after see-sawing during the session, with shares of Rio Tinto gaining 1.05 percent, BHP Billiton higher by 0.65 percent and Fortescue Metals up 0.65 percent.
Chinese producers were higher, with Baotou Steel up 1.69 percent and Baoshan Steel higher by 1.52 percent, while Yunnan Copper was up 1.76 percent.
The weakened against the dollar, with the pair trading at 6.4648. The People's Bank of China had fixed the yuan midpoint rate at 6.4585 on Friday, compared with Thursday's fix at 6.4612.
Brent crude for June delivery fell 0.82 percent in Asian trade to $40 a barrel, after its May contract, which expired Thursday, settled at $39.60 a barrel. U.S. crude futures also fell 25 cents to $38.09 a barrel after settling up 2 cents in the previous session, reported Reuters. Both futures posted higher quarterly gains in March.
"Oil has its best month since April last year, adding 13 percent from talk of OPEC deals and record low rig counts in the U.S.," Evan Lucas, market strategist at spread-better IG, said in a Friday note.
Major U.S. indexes closed mixed, with the down 0.18 percent, the S&P 500 finishing lower by 0.2 percent and the effectively flat on the last trading day of the first quarter. The Dow Jones industrial average and the S&P 500 posted two consecutive quarters of gains, rising 1.49 percent and 0.77 percent, respectively. However, the Nasdaq suffered its worst quarter since 2009, posting a 2.75 percent quarterly decline.
Markets will also be watching the U.S. March non-farm payrolls report, a key indicator which the Federal Reserve monitors.