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Asia markets mostly higher; Nikkei down after Japan's growth flattens on quarter

Toshifumi Kitamura | AFP | Getty Images

Most Asia markets reversed early losses to trade higher on Monday, but Japan shares slipped after data showed the world's third-largest economy failed to grow in the three months through June, missing already subdued forecasts.

The benchmark Nikkei 225 wavered between gains and losses before closing down 50.36 points, or 0.3 percent, at 16,869.56. The Topix fell 6.59 points, or 0.5 percent, to 1,316.63.

In Australia, the ASX 200 advanced 9.08 points, or 0.16 percent, to 5,540, with the heavily-weighted financials sub-index rising 0.59 percent. The materials subindex, however, was down 1.52 percent, while the gold subindex fell 3.25 percent as resources producers came under pressure.

Major Australian miners were down more than 2 percent each, with Fortescue dropping 3.27 percent.

In Hong Kong, the Hang Seng index was up 0.75 percent in afternoon trade.

Chinese mainland markets were also higher, likely giving a boost to sentiment across the region after Japan's data disappointment. The Shanghai composite advanced 74.73 points, or 2.45 percent, to 3,125.40, and the Shenzhen composite gained 49.57 points, or 2.51 percent, to 2,023.23.

The market likely expected additional stimulus from Beijing after the mainland's data deluge last week showed the economic health of the world's second largest economy was falling short of expectations.

Investors were also likely anticipating the launch of the Shenzhen-Hong Kong stock connect due sometime this year. On Friday, Reuters reported that China's financial regulatory body, the China Securities Regulatory Commission (CSRC), was preparing for the imminent launch and had set up a small working group to coordinate it.

The cross-border investment program was similar to the Shanghai-Hong Kong connect program allowing investors in the Chinese mainland to buy Hong Kong-listed shares.

The launch of the Shenzhen-Hong Kong stock connect will "fuel momentum on small-caps," according to HSBC's head of Hong Kong and China equity research, Steven Sun.

"We expect the southbound fund flows of Shenzhen-Hong Kong Stock Connect, which could be announced in the coming weeks, to share similar preference on small-caps as domestic A-share investors," Sun said.

Markets in South Korea were closed for Liberation day public holiday.

Before market open on Monday, data from the Japanese cabinet office showed the country's gross domestic product (GDP) was unchanged in the April-June quarter from the January-March quarter, with exports weighing. The economy, however, grew 0.2 percent on an annualized basis.

A Reuters poll of economists had expected an annualized increase of 0.7 percent and a quarterly rise of 0.2 percent.

The subdued numbers will likely revive doubts over Japanese Prime Minister Shinzo Abe's efforts to kick start the economy. In July, Abe had announced a fiscal stimulus package worth 28 trillion yen, but analysts believed it would likely have limited impact in boosting future GDP growth.

Singapore's DBS Bank said in a Friday note, "the actual effects could be very limited, given that fresh spending in the package is of similar size as in the previous years."

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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Also dampening the sentiment in Japan, the yen was relatively stronger, trading at 101.07 against the dollar as of 3:13 p.m. HK/SIN. The Japanese currency traded as high as 101.02 earlier in the session, compared with levels near 102.0 on Friday.

In the broader currency market, the dollar also slipped against a basket of currencies, trading at 95.636. Early last week, the dollar index traded above 96.00 before slipping toward the end of the week amid disappointing data.

"We saw some dollar weakness at the start of the week, but the disappointing retail sales report sealed the fate of the greenback," said Kathy Lien, managing director of foreign exchange strategy at BK Asset Management, in a late-Friday note.

Elsewhere, the British pound tumbled late last week to near its post-Brexit lows. The pound traded as low as $1.2896, near its lowest level since 1985, before paring some losses to trade at $1.2940 on Monday afternoon in Asia.

The euro strengthened against the pound to levels not seen since 2013, with the euro/pound pair trading as high 0.8650, compared with levels near 0.8460 in early August. As of 3:15 p.m. HK/SIN, the pair traded at 0.8633.

But some analysts expected the pound to find support at current levels.

"They've got to renegotiate the deal with Europe, but we don't think Europe's going to cut their nose off to spite their face and make it too difficult for them," Scott Cavanough, senior vice president for financial markets at Compass Global Markets, told CNBC's "Squawk Box".

"The Eurozone's still going to cooperate with them as far as their exports go," he added.

In company news, Australian health and safety protection solutions provider Ansell reported its full year 2016 earnings, posting sales revenue of $1.572 billion, which was down 4 percent from a year earlier.

While Ansell said its results were at the low end of its guidance, the company also said it would consider continuing its share buyback. Dow Jones also reported that the company was weighing the sale of its sexual wellness division, which makes condoms.

Ansell shares jumped 17.74 percent.

Shares of Japanese electronics maker Sharp rose 10.38 percent, extending Friday's more than 19 percent gain, after news on Friday that China's antitrust authorities approved the massive takeover bid from Taiwanese manufacturer Hon Hai.

Oil prices climbed more than 1 percent during Asian hours, following the rebound in the previous week after comments from Saudi Arabia's energy minister lent credibility to the idea that OPEC might take action to tackle low oil prices.

U.S. crude futures traded up 1.21 percent at $45.03 a barrel, while global benchmark Brent was up 1.13 percent at $47.50.

Stateside, the Dow Jones industrial average slipped 0.2 percent on Friday, while the S&P 500 and the Nasdaq composite finished nearly flat.

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