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Asian indexes mixed after release of positive China manufacturing PMI while dollar climbs

Key Points
  • Asian markets mixed after positive U.S. data gave Wall Street a boost
  • China August official manufacturing PMI beat expectations, but services PMI slid
  • Dollar extended overnight gains against the yen
  • Toshiba missed a self-imposed deadline to sell its chip business

Asian indexes closed mixed on Thursday as the dollar extended gains and investors digested China manufacturing and services PMIs, as well as solid U.S. economic data.

Japan's rose 0.72 percent, or 139.7 points, to close at 19,646.24, with gains seen across automakers and most tech stocks, as the dollar strengthened against the yen. Meanwhile, South Korea's Kospi erased 0.38 percent, or 9.1 points, to end at 2,363.19.

Down Under, the S&P/ASX 200 tacked on 0.79 percent, or 44.779 points, to finish at 5,714.5 as the tail-end of earnings reporting season approached. The index was driven by strength across most sectors, with the heavily-weighted financials sub-index rising 0.71 percent.

Greater China markets were mixed. Hong Kong's retreated 0.53 percent by 3:24 p.m. HK/SIN as China bank stocks weighed on the index. On the mainland, the slipped 0.08 percent to close at 3,360.9959 while the Shenzhen Composite gained 0.311 percent to close at 1,944.9391.

Malaysia markets were closed for a public holiday.

Asia-Pacific Market Indexes Chart

China's official manufacturing PMI rose to 51.7 in August, beating the 51.3 forecast in a Reuters poll. Meanwhile, the official services PMI dropped to 53.4 in August, compared with 54.5 a month earlier. The August number was the lowest since May 2016, according to Reuters.

"If the data in September continues to be supportive, the growth outlook for China's second half could exceed market expectations for a slowdown," said Betty Rui Wang, ANZ Research senior China economist, in a note.

That Australian dollar, often sensitive to Chinese economic data, dipped as low as $0.7884 following the release after trading around the $0.791 handle ahead of the data release. The currency recovered later to fetch $0.7902 at 3:12 p.m. HK/SIN, a tad above Wednesday's close of $0.7898.

In the U.S., revised second-quarter gross domestic product showed the economy grew 3 percent in that period, above the 2.6 percent figure previously calculated. Meanwhile, the private sector in the U.S. added 237,000 positions in August, according to the latest release from ADP and Moody's Analytics. That was the fastest pace of private payrolls growth in five months.

Stocks stateside closed higher as investors digested the economic data.

The positive data releases also gave the greenback a boost. The dollar index, which tracks the greenback against a basket of six currencies, climbed as high as 92.946 overnight on the back of positive U.S. data. The dollar index was mostly flat at 92.9439 at 3:13 p.m. HK/SIN.

Against the Japanese currency, the dollar rose to its highest levels in around two weeks. The dollar last fetched 110.44 yen, a touch below a high of 110.60 reached earlier in the session.

The dollar had earlier dipped following the release of Japan July industrial production on Thursday. Industrial output slipped 0.8 percent, compared with the previous month, Reuters reported, slightly more than the fall of 0.5 percent forecast in a Reuters poll.

Despite largely solid economic data releases, geopolitical uncertainties continued to linger in the background, OCBC Treasury Research said in a note, citing a tweet from President Donald Trump that was critical of dialogue with North Korea. The tweet came after North Korea launched a missile that flew over Japan on Tuesday.

Still, markets have become quicker in regaining their composure following such events, said Stephen Innes, APAC head of trading at OANDA. "Risk off flows are becoming an increasingly ephemeral event," Innes added in a note.

Elsewhere, Trump also said he didn't want to be "disappointed by Congress" on tax reforms during a speech on Wednesday. The president provided few details aside from outlining how cutting corporate and individual tax rates could lead to economic growth and job creation.

On the energy front, the largest oil refinery in the U.S. started to shut down on Wednesday due to severe weather conditions arising from Tropical Storm Harvey. Around 24 percent of U.S. refining capacity has now been shuttered, according to Reuters.

U.S. gasoline futures continued climbing after settling 5.9 percent higher overnight. Gasoline futures traded 5.06 percent higher at $1.9800 a gallon, after touching as high as $2.0086 earlier in the session — the first time the commodity had surpassed the $2 level since 2015, Reuters said. Brent crude slide 0.24 percent to trade at $50.74 a barrel while U.S. crude added 0.15 percent to trade at $46.03.

In corporate news, Toshiba's attempt to sell its memory chip unit was back in the spotlight after Reuters reported a consortium led by Bain Capital had made a last-minute bid of around $18 billion. Apple and South Korea's SK Hynix are part of the consortium, Reuters said.

Reuters reported on Thursday that Toshiba failed in meeting its Aug. 31 deadline to secure an agreement with another consortium involving Western Digital and would continue talks. Toshiba's stock closed down 0.65 percent.

Shares of major China's largest banks were lower despite reporting solid earnings and narrowing non-performing loan ratios. Shares of Bank of China traded in Hong Kong erased earlier gains to fall 0.73 percent by 3:20 p.m. HK/SIN. Other names also traded lower: Industrial and Commercial Bank of China sank 2.82 percent and Agricultural Bank of China slid 1.88 percent. Shares of the banks listed on the mainland also sold off.

Other market movers included a 3.54 percent drop in the stock of South Korean automaker Kia Motors. Kia was ordered on Thursday to pay 420 billion won ($374 million) in unpaid wages by a court, Reuters said.

Meanwhile, Australian retailer Harvey Norman shares plunged 7.48 percent by the end of the session after it declared a smaller dividend this year. The company also announced full-year profit for the year ending on Jun. 30 rose to A$448.98 million ($355 million), above estimates of around A$414 million, Reuters said.

In other economic news, South Korea's central bank kept its policy rate unchanged at 1.25 percent, as was widely expected.