Mainland China stocks saw a significant surge, with the CSI 300 index jumping over 6%, driven by gains in the property sector, which rose 7.4%.
In contrast, Japan’s Nikkei 225 tumbled by 4.64% on Monday, with industrial production figures and market losses in the real estate sector playing a key role in the decline.
As investors digested key economic data from both countries, the divergence in performance highlighted the varying economic trajectories in East Asia.
China PMI data
China’s economic data released on Monday showed some mixed signals.
The official purchasing managers’ index (PMI) for September came in at 49.8, slightly above the expected 49.5.
While the reading was better than anticipated, it still represented a fifth consecutive month of contraction for the manufacturing sector, indicating ongoing weakness.
The Caixin PMI survey, a private report compiled by S&P Global, painted an even bleaker picture.
The manufacturing PMI fell to 49.3 in September, down from 50.4 in August, marking the fastest contraction in 14 months.
This figure was below expectations of 50.5, highlighting the challenges faced by smaller firms in China’s private sector.
Mainland China CSI 300 index climbs by 6.22% despite manufacturing slowdown
Despite the manufacturing sector’s struggles, mainland Chinese stocks rallied, with the CSI 300 index gaining 6.22%. Consumer and property stocks were the key drivers of this performance.
The Hang Seng Mainland Properties Index surged 8%, buoyed by hopes of economic stimulus and recovery efforts in the beleaguered property sector.
Hong Kong’s Hang Seng index also saw a boost, climbing 3.34%, powered by consumer stocks.
The optimism surrounding the Chinese economy’s recovery overshadowed concerns about manufacturing contraction, leading to robust gains in the equity markets.
Japan’s Nikkei 225 suffers steep losses of 4.64%, industrial production down 4.9%
Meanwhile, Japan faced a rough start to the week, with the Nikkei 225 index plunging by 4.64%.
Losses were led by the real estate sector, while department store holding company Isetan Mitsukoshi Holdings was the biggest loser on the index, falling by 11%. Japan’s broad-based Topix index also dropped by 3.3%.
Industrial production in Japan fell by 4.9% year-on-year in August, a significant decline from the previous month’s drop of 0.4%.
This fall was much sharper than expected, with the month-on-month decline standing at 3.3%, well above the anticipated 0.9% drop.
This sharp contraction in industrial output added to the negative sentiment in Japanese markets.
Retail sales in Japan rise 2.8% in August, but the yen weakens
While Japan’s manufacturing and industrial sectors struggled, retail sales provided some positive news.
August retail sales climbed by 2.8% year-on-year, exceeding the 2.3% rise expected by economists.
This followed a revised 2.7% increase in July, suggesting that consumer spending in Japan remains resilient despite broader economic challenges.
However, the Japanese yen weakened by 0.13% against the US dollar, trading at 142.38.
Investors remain cautious as they weigh the implications of recent economic data and the upcoming political changes in the country.
Japan’s political landscape
Adding to the economic uncertainty in Japan, investors are also digesting the political transition following Shigeru Ishiba’s victory in the Liberal Democratic Party elections.
Ishiba will succeed Fumio Kishida as Japan’s prime minister, raising questions about potential policy shifts that could impact Japan’s economy and markets in the coming months.
Outside of China and Japan, other Asian markets experienced mixed results.
Australia’s S&P/ASX 200 index climbed 0.72%, breaking its all-time high of 8,246.2. In South Korea, the Kospi index fell 1.13%, while the smaller-cap Kosdaq index slipped 1.21%.
Dow Jones reaches new high on inflation data optimism
Over in the US, the Dow Jones Industrial Average reached a new high on Friday, gaining 0.33% to close at 42,313.00.
This rise came as traders assessed fresh inflation data, with the personal consumption expenditures (PCE) price index – the Federal Reserve’s preferred inflation gauge – showing an annualised increase of 2.2% in August.
This figure matched expectations and reinforced hopes that inflation is gradually coming under control, providing a boost to US equities.
However, the S&P 500 dipped 0.13%, while the Nasdaq Composite lost 0.39%.
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