Asian stocks: Nikkei outperforms, China lags on weak PMI

Investing.com– Most Asian stocks rose slightly on Wednesday with Japan’s Nikkei 225 coming back in sight of record highs, while Chinese markets fell tracking a disappointing reading on service sector activity.

Regional markets took a positive lead-in from Wall Street, where the and the finished at record highs after Federal Reserve Chair Jerome Powell flagged some progress in bringing down inflation.

But this optimism was limited, with U.S. stock index futures falling slightly as Powell also warned that the Fed needed more confidence to cut rates.

Anticipation of more cues on U.S. interest rates this week- with data and the of a Fed meeting- limited any major gains in Asian markets, as did weak economic signals from China.

Nikkei outperforms, dovish BOJ bets build

Japan’s was an outperformer, rising 0.9% and breaking above the 40,000 level for the first time in three months. The index was also close to record highs hit in March.

The index was on a tear this week as soft economic data from Japan fueled expectations that the Bank of Japan will have limited headroom to tighten monetary policy this year. 

Japan revised first-quarter GDP data to show a much sharper contraction than initially expected. But traders still piled into Japanese stocks, given that corporate earnings have so far largely risen past weakness in the economy. 

Still, the economically-sensitive index rose 0.2%.

Chinese stocks fall as services PMI disappoints 

China’s and indexes lagged their peers on Wednesday, falling 0.4% each after a middling purchasing managers index reading. The two were also nursing a sharp tumble from annual highs hit in May.

The grew less than expected in June, indicating that China’s services sector was cooling and raising concerns over a broader slowdown in Asia’s largest economy.

The services sector has remained in expansion since China rolled back anti-COVID measures in late-2022, and has also underpinned business activity amid weakness in manufacturing. But the sector may now be facing headwinds from persistently weak local demand.

While Caixin data released earlier this week showed the manufacturing sector remained in expansion, government PMI data released on Sunday showed a contraction in the sector, providing mixed cues on the economy. 

Hong Kong’s index shrugged off weakness in Chinese stocks, rising 0.7% as it recovered from a near two-month low. 

Other Asian markets were marginally higher. South Korea’s added 0.4%, while Australia’s rose 0.3% as data showed grew more than expected in May.

Futures for India’s index pointed to a mildly negative open, as the index and the faced resistance at record highs. 

Sentiment towards Adani Enterprises Ltd (NS:) and its sister firms also soured after Hindenburg doubled down on a short-seller report from last year, where the firm had leveled damning allegations against the Indian conglomerate. Hindenburg said it had received a show-cause notice from India’s securities regulator.