Asia report: Markets mixed as investors look to Fed

(Sharecast News) - Asia-Pacific equities delivered a mixed performance on Wednesday as investors awaited the outcome of the US Federal Reserve's policy meeting, where an interest rate cut is widely expected. The cautious mood followed declines on Wall Street overnight.

Patrick Munnelly, market strategy partner at TickMill, noted that "Asian stocks fluctuated between minor gains and losses as investors awaited the Federal Reserve's policy announcement, speculating that the central bank might lower interest rates for the first time this year," adding that "the MSCI Asia Pacific Index rebounded from earlier declines to increase by 0.1%".

He said investors were "closely monitoring the Fed meeting for hints about interest rate movements that will influence the economic outlook in the coming months," with "money markets fully anticipating a quarter-point reduction from the Fed, along with a series of cuts expected over the next year."

Markets mixed as investors look to Fed

Japanese shares slipped, with the benchmark Nikkei 225 easing 0.17% to 44,824.00 and the broader Topix shedding 0.71% to 3,145.83.

Losses were led by Mitsui Mining and Smelting, down 4.67%, T&D Holdings, off 4.65%, and Sumitomo Dainippon Pharma, which fell 4.49%.

Munnelly highlighted that "in Japan, a 20-year government bond auction attracted the strongest interest since 2020, thanks to rising yields," describing it as "the first evaluation of demand for new super-long bonds following prime minister Shigeru Ishiba's resignation announcement, opening the door for successors who may advocate more aggressive fiscal policies."

Chinese markets advanced, with the Shanghai Composite up 0.37% at 3,876.34 and the Shenzhen Component rising 1.16% to 13,215.46.

Gains were driven by sharp rallies in Ye Chiu Metal Recycling China, up 10.14%, Beijing Jingyuntong Technology, up 10.12%, and EGing Photovoltaic Technology, up 10.1%.

Hong Kong stocks outperformed as the Hang Seng Index jumped 1.78% to 26,908.39, boosted by a 15.72% surge in Baidu, a 7.55% gain in Haier Smart Home, and a 7.12% rise in SMIC.

Munnelly observed that "Chinese tech stocks in Hong Kong rose to their highest point in four years, driven by heightened enthusiasm for artificial intelligence."

In South Korea, the Kospi 100 dropped 1.31% to 3,505.59 as Hyundai Engineering & Construction slid 5.85%, Hyundai-Rotem declined 5.16% and LIG Nex1 fell 4.61%.

Australian shares also retreated, with the S&P/ASX 200 down 0.67% at 8,818.50, weighed by New Hope Corporation, which tumbled 8.3%, Genesis Minerals, off 5.19%, and Brickworks, down 4.9%.

New Zealand's S&P/NZX 50 dipped 0.05% to 13,228.38, dragged by a 3.2% drop in A2 Milk Company, a 2.78% fall in NZX, and a 1.59% decline in Port of Tauranga.

In currency markets, the dollar was last down 0.16% on the yen to trade at JPY 146.25, while it strengthened 0.19% against the Aussie to AUD 1.4987, and advanced 0.2% on the Kiwi, changing hands at NZD 1.6736.

Munnelly said the "dollar index showed little movement after a two-day decline, bringing it back to levels not seen since March 2022."

Gold, he added, "remained steady after surpassing the $3,700-an-ounce mark for the first time, supported by a weakened dollar."

Oil prices eased, with Brent crude futures last down 0.67% on ICE at $68.01 per barrel, and the NYMEX quote for West Texas Intermediate off 0.7% at $64.07.

Japan trade deficit narrows less than expected, Singapore exports slump

In economic news, Japan's trade deficit narrowed less than expected in August as stronger overseas shipments helped offset persistently weak domestic demand.

Government data on Wednesday showed the trade balance at a deficit of JPY 242.5bn, smaller than forecasts for a JPY 513.6bn shortfall but wider than the previous month's JPY 118.4bn gap.

Exports fell just 0.1% from a year earlier, beating expectations for a 1.9% decline and improving on July's 2.6% drop.

The modest resilience in exports followed the finalisation of a Tokyo-Washington trade deal last month, which capped US tariffs on Japanese goods at 15%, down from the 25% initially proposed.

However, overall demand abroad remained subdued, with shipments to China and Europe still soft. Imports shrank 5.2%, a steeper fall than the 4.2% forecast but less severe than July's 7.4% drop, underscoring sluggish domestic consumption amid high import prices and sticky inflation.

The figures came ahead of a Bank of Japan meeting at which the central bank is widely expected to keep interest rates on hold.

Elsewhere, Singapore's non-oil domestic exports slumped 11.3% year-on-year in August, far worse than expectations for a 1% rise, as both electronics and non-electronics shipments fell.

The decline deepened from a revised 4.7% drop in July, while seasonally adjusted exports slid 8.9% from the prior month, defying forecasts for a 0.4% increase.

Enterprise Singapore reported annual export falls to Indonesia, the US and China, while shipments to the EU, Taiwan and South Korea rose.

Exports to the US plunged 28.8% following a 42.8% drop in July, as Washington's 10% tariff on Singaporean goods weighed heavily despite a bilateral free-trade agreement.

Authorities in Singapore had warned of a second-half slowdown after front-loaded shipments buoyed growth in early 2025, and the trade ministry continued to expect non-oil export growth of just 1% to 3% this year.

Trade minister Gan Kim Yong said US tariffs on Singapore's trading partners could also curb demand, as products assembled abroad using Singaporean components faced higher US levies.

Reporting by Josh White for Sharecast.com.