Asian shares stay put after mixed Chinese data

Sydney — Asian shares barely budged on Thursday as investors reacted cautiously to mixed data from China, while the pound hovered near nine-month highs as the risk of a no-deal Brexit receded following a late-night vote.

MSCI’s broadest index of Asia-Pacific shares outside Japan held at 522.06 points.

Japan’s Nikkei rose 0.5% while Australian and New Zealand shares each added 0.2%.

Chinese shares were in the red after data showed the country’s industrial output expanded at the slowest pace in 17 years, though retail sales and fixed asset investment grew by more than expected.

Shanghai’s SSE Composite index stumbled 1.2% while the blue-chip CSI 300 eased 0.4%.

Investors were watching the data for clues about the health of China’s economy after growth cooled to 6.6% in 2018.

Despite China’s slowing growth, Asian markets have had an impressive rally this year, with the MSCI index climbing about 10% largely after the US Federal Reserve all but abandoned its rate hike plans.

Wall Street was buoyant overnight after US producer prices barely edged higher in February, the latest sign that inflation remains tame and affirming expectations the Federal Reserve will maintain a “patient” approach to future tightening.

Analysts, however, remain sceptical about how much further the share rally will run as slowing global growth, weak corporate earnings and trade tensions between the US and China hang heavy on risk assets.

“Before we conclude that this market still has decent legs, we’d like to see equity prices supported by stronger macro data, lifted by better earnings trends, and confirmed by stable-to-rising yields,” David Lafferty, chief market strategist at Natixis, said in a note.

The state of US-China trade talks also weighed on investors after President Donald Trump said he was in no rush to complete an agreement. Trump and his Chinese counterpart Xi Jinping had been expected to hold a summit at the US president’s Mar-a-Lago property in Florida later this month, but no date has been set for a meeting.

Most of the action overnight was in sterling after the British parliament rejected leaving the EU without a deal, paving the way for a vote that could delay Brexit until at least the end of June.

The rejection of a no-deal Brexit sent the cable rallying to $1.3380, the highest since June 2018. It jumped 2.1% for its best one-day percentage gain since April 2017 and was last at $1.3315.

Analysts said the real test for sterling is yet to come as legislators still need to agree a way forward before an extension on Britain’s exit could be obtained from the EU.

“If they manage to achieve cross-party support for a deal, likely a ‘softer Brexit’ sort of a deal, this could potentially be very good news for UK assets,” said Russel Silberston, co-head of multi-asset at Investec Asset Management.

“If parliament fails to come to an agreement, it would go to a second referendum. My concern is that this would call into question the role of parliament and could have serious future political consequences,” Silberston added.

“Sterling is the litmus test for sentiment.”

The euro extended gains for a fifth day in a row to the highest since March 5. It was last at $1.1329.

Wednesday’s vote boosted investor optimism in European equities too, with the pan-European STOXX 600 index climbing 0.6% while London’s FTSE 100 added 0.1% as sterling extended gains.

The dollar index hovered near a seven-day trough, but the greenback gained slightly to 111.44 against the Japanese yen.

Oil prices extended overnight gains with US crude up 15 cents per barrel at $58.41 and Brent adding 22 cents to $67.77.

Reuters