Asia Markets

Asian shares slip following weaker-than-expected China data

Key Points
  • China fixed asset investment, industrial production and retail sales missed expectations
  • Dollar index held onto gains made following U.S. tax reform headlines on Wednesday
  • Bank of England will announce its interest rate decision Thursday U.K. time

Most major indexes in Asia closed lower on Thursday after the release of softer-than-expected China data. Markets also digested the rise in U.S. Treasury yields overnight following tax reform headlines out of Washington.

Japan's closed lower after three straight days of gains. The benchmark index finished the session lower by 0.29 percent, or 58.38 points, at 19,807.44.

Across the Korean Strait, the Kospi rallied late in the session, climbing 0.74 percent to close at 2,377.66. Gains in blue chips helped to buoy the broader market: Samsung Electronics finished 1.4 percent higher and Hyundai Motor closed 2.24 percent higher.

Down Under, the S&P/ASX 200 slipped 0.1 percent to close at 5,738.7, with the materials sub-index falling 0.88 percent and leading losses.

The declined 0.48 percent by 3:00 p.m. HK/SIN. Mainland markets finished lower: The edged down 0.38 percent to close at 3,371.4256 while the Shenzhen Composite was off 0.072 percent at 1,993.5315.

A barrage of Chinese data released on Thursday came in weaker than expected. August industrial production rose 6 percent from one year ago, below the 6.6 percent forecast in a Reuters poll. Fixed asset investment, meanwhile, increased 7.8 percent from January to August, missing a forecast of 8.2 percent.

Retail sales also missed the mark, rising 10.1 percent in August from a year ago. A Reuters poll had estimated a rise of 10.5 percent.

The numbers may have come in softer than forecast, but investors should also take note of subsets in the data releases, Gavin Parry, managing director of Parry International Trading, told CNBC.

"Industrial production was very much affected by the weakness in coal production for over a year-and-a-half, and that kind of follows through a lot into the policies that are coming out of Beijing," he added, highlighting how authorities have curtailed excess supply in industries that have a negative impact on the environment.

The Australian dollar traded at $0.7996 after the lower-than-expected numbers out of China. The currency had traded as high as $0.8016 in the session on the release of solid jobs data. Movements in the Aussie dollar are influenced by China data due to Australia's dependence on exports.

In the U.S., tax reform was back in the spotlight after House Speaker Paul Ryan said Wednesday that a plan from Republicans would be released the week of Sept. 25.

While "nothing concrete" was announced, "there is a growing feeling that something will be done amid [President Donald] Trump's bipartisan approach along with the need for Republicans to score some runs ahead of next year's election," said National Australia Bank Currency Strategist Rodrigo Catril in a morning note.

Optimism over tax reform led to yields of the 10-year U.S. Treasury note firming to 2.194 percent compared to the 2.187 percent seen at the end of Wednesday.

The dollar on Thursday held onto gains after getting a lift from developments out of Washington overnight. The dollar index, which tracks the greenback against a basket of rival currencies stood at 92.419 at 3.13 p.m. HK/SIN, a touch above Wednesday's close of 92.407. The dollar index had traded around the 91 handle seen earlier this week.

The dollar was flat against the yen, with the currency last fetching 110.48 yen compared to levels around 110.46 seen in the previous session.

Investors also noted the bounce in U.S. producer prices in August, although the 0.2 percent increase on month was weaker than expected.

August consumer inflation data due during U.S. hours will be closely watched by investors for clues on the Federal Reserve's interest rate path.

On Wall Street, stocks closed at record levels despite mostly flat trade during the session, with the Dow Jones industrial average rising 0.18 percent, or 39.32, to close at 22,158.18.

Despite a fall in Apple stock on Wednesday, the company's South Korean suppliers continued their climb following the unveiling of the newest iPhone on Tuesday. Samsung Electronics was up 1.01 percent, SK Hynix advanced 0.92 percent and LG Display jumped 2.74 percent. Taiwan-listed Apple suppliers were mixed after falling in the last session: Largan Precision closed up 0.27 percent while Hon Hai Precision Industry fell 0.87 percent by the end of the session.

In corporate news, Toshiba said Wednesday it had entered into a memorandum of understanding with a consortium including Bain Capital to expedite negotiations to sell Toshiba Memory Corporation, its flash memory unit. Toshiba also said it would continue considering a separate offer made by Western Digital, but that the American data storage company was inflating its rights over Toshiba's chip unit, according to Reuters. Toshiba shares closed down 4.53 percent.

Outside of Asia, the Bank of England will announce its interest rate decision at 7:00 p.m. HK/SIN. The central bank is widely expected to leave interest rates unchanged. The unemployment rate in the country dropped to 4.3 percent in the three months ending in July, but wage growth failed to impress, Reuters reported.

On the energy front, U.S. crude were flat at $49.30 a barrel after settling more than $1 higher overnight. Brent crude lost 0.25 percent to trade at $55.02. Gains in oil prices on Wednesday came after the International Energy Agency said the oversupply of crude was beginning to shrink, according to Reuters.