Most Asian stocks moved in a flat-to-low range on Wednesday as markets remained on edge over slowing growth in China and the U.S. debt ceiling, while Japan’s Nikkei rallied further on stronger-than-expected first-quarter economic growth.
The Nikkei 225 index jumped 0.9% to a near 20-month high, extending recent gains as data showed that Japan’s economy grew more than expected in the first quarter, aided chiefly by strong consumer spending and inbound tourism.
But the outlook for the economy still remained dour, amid sustained slowdowns in Japan’s biggest export markets in the West.
Still, a strong earnings season, coupled with dovish signals from the Bank of Japan, saw the Nikkei vastly outperform its Asian peers in recent weeks.
Broader Asian stocks retreated on Wednesday, with China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes down 0.2% and 0.4%, respectively. Sentiment toward China was battered by a string of weak economic readings for April, which suggested that a post-COVID economic rebound in the country was running out of steam.
Heavyweight Chinese property stocks slid further on Wednesday after data showed that Chinese house prices fell for an eleventh straight month in April.
Recent losses in Chinese stocks saw the two benchmark indexes unwind a bulk of their gains made this year, as markets reconsidered the prospect of a strong economic rebound in the country this year.
Weakness in China spilled over into other Asian markets, with Hong Kong’s Hang Seng down 0.5%. Australia’s ASX 200 fell 0.5%, also coming under pressure from weaker-than-expected wage growth data, Investing.com cited.
Other Asian bourses recovered a measure of recent losses, with South Korea’s KOSPI up 0.6%, while the Taiwan Weighted index added 1.1%.
But sentiment still remained on edge amid uncertainty over a U.S. debt default, as negotiations among policymakers continued over raising the debt ceiling before a June 1 deadline. Regional stocks took a weak lead-in from Wall Street, as weak U.S. retail sales and industrial production data pointed to worsening conditions in the world’s largest economy.
Hawkish comments from a slew of Federal Reserve officials also dented sentiment towards risk-heavy assets, with U.S. interest rates now likely set to stay higher for longer.
Asian stocks face renewed headwinds this year, with risk-driven assets expected to see heavy selling in the face of worsening economic conditions and tight monetary policy. Slowing growth in China has also greatly dulled sentiment towards the region.
