Asia stocks: Japan rises on positive PMI, others muted amid economic uncertainty

Investing.com-- Most Asian stocks rose on Thursday amid increased optimism over lower U.S. interest rates, but overall gains were limited as a downward revision in payrolls data spooked markets. 

Japanese stocks were by far the best performers for the day, as purchasing managers index data showed sustained growth in the country’s services sector. But Chinese markets lagged, while gains in most other Asian markets were limited.

Regional markets took a mildly positive lead-in from Wall Street, as the minutes of the Federal Reserve’s late-July meeting showed more policymakers in support of an interest rate cut- further bets for a cut in September.

U.S. stock index futures were flat in Asian trade. But optimism over a rate cut was offset by data showing a severe downward revision in U.S. payrolls data in the year to March 2024, drumming up concerns that a slowing labor market could spur a potential recession in the world’s biggest economy.

Focus this week is squarely on an address by Fed Chair Jerome Powell at the Jackson Hole Symposium on Friday.

Japanese stocks cheered by positive services PMI 

Japan’s Nikkei 225 and TOPIX indexes were the best performers in Asia, rising 0.8% and 0.4%, respectively.

Sentiment towards Japan was buoyed by PMI data showing the services sector marked strong growth for a second consecutive month, as local demand was boosted by improving wages.

While Japan’s manufacturing PMI still shrank more than expected, overall business activity remained in expansion. 

Strength in the Japanese economy furthers the possibility of more interest rate hikes by the Bank of Japan this year, which could present some headwinds for local markets. But stocks with exposure to domestic demand are expected to benefit from this trend. 

Japanese consumer inflation data, due on Friday, is expected to offer more cues on the economy.

China lags, broader Asian markets less buoyant 

Broader Asian markets clocked much smaller gains, as optimism over interest rate cuts was tempered by renewed concerns over a U.S. recession. 

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes fell 0.3% and 0.1%, respectively, with sentiment towards the country showing little signs of improvement. Both indexes were at six-month lows.

A rebound in heavyweight technology and e-commerce stocks helped Hong Kong’s Hang Seng index rise 0.6%, although the index was nursing steep losses from the prior session.

South Korea’s KOSPI was flat after the Bank of Korea kept interest rates unchanged as expected, citing a need to keep inflation in check, even as the case for eventual rate cuts grew amid softening economic conditions.

Australia’s ASX 200 rose 0.2%, while futures for India’s Nifty 50 index pointed to a mildly negative open, with the index facing resistance near the 25,000 level.