Asian stocks drift higher before PCE data; Weak China PMIs spur stimulus hopes

Investing.com-- Most Asian stocks rose slightly on Friday with focus turning squarely towards key upcoming U.S. PCE inflation data, while Chinese markets advanced as soft business activity data sparked hopes for more stimulus.

Regional stocks took middling cues from a weak overnight close on Wall Street, as soft gross domestic product data added to concerns over stalling economic growth and high interest rates. U.S. stock index futures fell in Asian trade.

Focus was now squarely on PCE price index data, which is the Federal Reserve’s preferred inflation gauge, for more cues on interest rates. The reading is due later on Friday.

Anticipation of the inflation data limited any major gains in Asian markets.

Chinese stocks advance past weak PMIs, stimulus in focus 

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes rose about 0.3% each on Friday, rising even as purchasing managers index data showed a deterioration in business activity.

China’s manufacturing PMI slipped back into contraction in May, while non-manufacturing PMI grew at a slower-than-expected pace, indicating that a boost from earlier stimulus measures was now running dry.

But the weak readings ramped up hopes that Beijing will dole out more policy support for the economy, especially after the government rolled out a barrage of supportive measures through May.

“...there could be increased urgency to expedite the rollout of trade-in policies and other policies to support consumption and investment to keep the economy on track to reach its 5% growth target this year,” ING analysts wrote in a note. 

Chinese stocks were set for a flat finish to May, as a rebound from multi-year lows stalled in recent weeks. 

Hong Kong stocks, however, were an outperformer for the day, with the Hang Seng index surging 1.3% as investors bought into heavily-discounted heavyweight technology stocks.

The Hang Seng was also by far the best performer in Asia through May, up nearly 4% for the month as investors sought more exposure to a potential Chinese economic recovery. 

Asian stocks drift higher but set for middling May 

Most Asian stocks rose on Friday, but were set for a middling performance in May as fears of high interest rates and inflation battered sentiment towards equity markets. 

Japan’s Nikkei 225 index rose 0.3%, while the broader TOPIX added 0.7% as consumer price index data from Tokyo showed a mild increase in inflation.

But both indexes were set for a flat-to-low performance in May, as they wallowed below record highs hit earlier in 2024.

South Korea’s KOSPI rose 0.4% on Friday and was set to lose nearly 2% in May, hit by a rout in heavyweight chipmaking stocks as doubts over artificial intelligence grew.

Australia’s ASX 200 rose 0.5% and was set for a flat end to May, amid growing concerns that the Australian economy was cooling due to sticky inflation and high interest rates.

Futures for India’s Nifty 50 index pointed to mild gains after the index fell sharply from record highs this week. Jitters over the 2024 general election put the Nifty on course for mild losses in May, with the results of the election due on June 4.