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Asia markets mostly up, with Australia shares jumping as RBA cuts rates

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Kazuhiro Nogi | AFP | Getty Images

Asian stocks mostly gained on Tuesday, despite disappointing data from China, with Australia's shares climbing and its dollar falling after the Reserve Bank of Australia cut interest rates unexpectedly.

The RBA cut its benchmark rate by 25 basis points to a record low 1.75 percent, noting that inflation data are unexpectedly low and that it is less concerned by the risk low rates pose to the housing market. A majority of economists polled by Reuters had expected no change.

In the wake of the decision, the benchmark ASX 200 ended up 2.11 percent, or 110.83 points, at 5,353.80, compared with gains of around 0.55 percent before the decision. The Australian dollar dropped to as low as $0.7553 after the decision, from levels a tad above $0.77 before the announcement. The Australian dollar recovered a bit to fetch $0.7613 at 3:36 p.m. HK/SIN time.

Regional markets largely shrugged off a disappointing survey on China's manufacturing sector.

The China Caixin manufacturing purchasing managers index (PMI) for April fell to 49.4 from March's 49.7, shrinking for a 14th month and coming in below a Reuters forecast for 49.9. Levels below 50 indicate contraction.

Economists weren't necessarily downbeat on the reading.

"Although they missed expectations, the latest PMI readings do little to alter our view that China is in the midst of a cyclical rebound that should continue for at least another couple of quarters," Julian Evans-Pritchard, a China economist at Capital Economics, said in a note Tuesday. "There are few signs in the latest readings that the ongoing property rebound, a key driver of the recent recovery, is losing steam."

Hong Kong's Hang Seng Index dropped 1.45 percent by 3:37 p.m. HK/SIN time, extending losses after the disappointing data. But on the mainland, shares extended gains, with the Shanghai Composite tacking on 1.87 percent, or 54.87 points, to end at 2993.20, and the Shenzhen Composite added 2.94 percent, or 55.04 points, to close at 1929.03. South Korea's Kospi index added 0.42 percent, or 8.26 points, to end at 1986.41.

In Australia, shares of ANZ surged 5.56 percent, erasing early losses of as much as 4.0 percent, despite the heavyweight bank reporting that its fiscal first-half profit tumbled more than 20 percent, coming in below expectations, and spurring the bank to cut its dividend. That follows a sell-off in banks Monday after Westpac's earnings also missed expectations, which had knocked ANZ's shares down 2.2 percent.

But traders may be focusing instead on ANZ's statement that the earnings miss was largely due to charges related to "repositioning" the bank to improve profit ahead.

Market players will also be watching for the release of the Australian government's budget, due after market close. In a note Tuesday, ANZ said it doesn't expect much adjustment in the country's fiscal profile.

Symbol
Name
Price
 
Change
%Change
NIKKEI
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HSI
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ASX 200
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SHANGHAI
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KOSPI
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CNBC 100
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In Hong Kong, shares of index heavyweight HSBC added 0.87 percent by 3:39 p.m. HK/SIN time, erasing losses after reporting earnings. During market trade, the bank reported a smaller-than-expected drop in first-quarter profit, with pretax profit falling 14 percent on-year to $6.1 bilion.

The dollar index, which measures the greenback against a basket of currencies, was at 92.143 at 3:40 p.m. SIN/HK time, tapping its lowest level since January 2015. That's off levels as high as 94.8 last week. ISM manufacturing data for April came in at 50.8, down from 51.8 in March, weighed on the dollar. The final Markit U.S. manufacturing PMI fell to 50.8 in April from 51.5 in March.

Japan's markets were closed Tuesday for the Constitution Day holiday. The Nikkei 225 finished down 3.11 percent on Monday, weighed by a surge in the yen against the dollar.

The yen continued to gain ground, with the dollar fetching 105.63 yen at 3:40 p.m. SIN/HK time, tapping its lowest levels since October 2014, before the Bank of Japan launched its second massive round of quantitative easing. The yen was down from levels around 106.44 yen overnight and from levels over 111.50 yen last week. The stronger yen has weighed on Japan's shares, with the benchmark index there falling around 8 percent since last week when the Bank of Japan surprised markets by holding its policy steady.

"The yen was caught in a vicious short squeeze after BOJ disappointed market expectations for further easing," Mizuho said in a note Tuesday. "With the BOJ not signaling imminent easing, the risk is skewed towards further yen strength." The bank forecast the dollar-yen pair could test 105, especially as Japan's Golden Week holidays will keep its markets closed for much of the week, with trading volume likely low.

Oil prices rose in Asian trade after losing ground overnight, with Reuters reporting OPEC production was near all-time peaks. In Asian trade by 3:42 p.m. HK/SIN time, U.S. crude oil futures added 1.0 percent to $45.24 a barrel after shedding 2.48 percent overnight, while Brent tacked on 0.98 percent after falling 3.3 percent overnight, retracing some of its 21.5 percent gain in April.

"The market remains awash with oil," Norbert Ruecker, head of commodity research at Julius Baer, said in a note. "With the futures market now providing the opportunity to shale operators to lock in next year's prices at above $50 per barrel, we would not be surprised to see U.S. oil output holding up against expectations. In brief, the latest rebound in oil prices is set to prolong the supply glut."

Energy shares were mostly lower, with Australia's Woodside shedding 0.38 percent and Hong Kong-listed Petrochina off 1.05 percent.

In Singapore, shares of DBS added 0.52 percent by 3:42 p.m. HK/SIN time, bucking a 0.89 percent decline in the benchmark Straits Times Index, after the bank reported before market open that net profit for the first quarter ended March 31 was 1.20 billion Singapore dollars ($900 million), up 6 percent on-year after excluding one-time items in the previous period. This beat a Reuters forecast for S$1.017 billion.

In Australia, Air New Zealand climbed 3.98 percent after media reported the company expects fuel prices to remain favorable, but shares of Virgin Australia tumbled 3.03 percent, extending Monday's 5.71 percent drop after the company's announcement that it will cut capacity by 5.1 percent in the fiscal fourth quarter.

Shares of SurfStitch plunged 53.62 percent after the casual wear retailer cut its guidance for pro forma fiscal full-year earnings before interest tax depreciation and amortization (EBITDA) to A$2-3 million in the wake of restructuring steps. That compares with first-half pro-forma EBITDA of A$13.9 million reported in February.

Stateside, markets rebounded from last week's losses, with the Nasdaq composite closing up 0.88 percent. The Dow Jones industrial average finished 0.66 percent higher, while the S&P 500 ended up 0.78 percent.

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