Asian stocks fall as upbeat Chinese data fails to impress

SYDNEY (Reuters) – Asian stocks fell on Tuesday, shrugging off an initial rally from better-than-expected Chinese economic data, as signs of uncertainty in the country’s recovery weighed on investor sentiment.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 0.5%, a deeper loss than earlier in the day when it fell 0.27%.

China’s economy grew 4.5% year-on-year for the first quarter, beating most economists’ expectations.

The currencies of Australia and New Zealand, whose exports depend on Chinese demand, rose after the GDP data.

Despite some initial momentum in the broader markets, the better-than-expected data failed to spark a sustained rally in regional stocks.

Hong Kong’s Hang Seng Index (.HSI) fell 0.85% on Tuesday, dragged down by declines in consumer and technology stocks. China’s CSI300 (.CSI) was slightly higher, up 0.08%.

Australian shares (.AXJO) were down 0.45%. Japan’s Nikkei (.N225) was the best performer in the region rising 0.55%.

Analysts said the market’s mixed performance was the result of some fundamental Chinese data falling short of expectations, despite strong headline results.

Separate data on Chinese activity released on Tuesday also showed factory production accelerating but missing expectations, while growth in fixed-asset investment slowed unexpectedly.

“The headline number is a positive surprise and is generally a good albeit uneven set of numbers, which is reflected in the markets’ response,” said David Zhao, global market analyst for Asia Pacific at Invesco.

“The prevailing market assumption is that China is emerging from the pandemic and that growth will be driven by consumption. And while the recovery is on track, I don’t think economic growth from what we’ve seen so far is exceeding expectations by much.”

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Zhao said weaker real estate investment during the quarter showed the ailing sector has not recovered and could hamper China’s economic growth again this year.

“I think the numbers show today that the 5% growth target will be achieved, but the amount of growth that will exceed that will depend on the real estate market,” he said.

For 2023, gross domestic product growth was expected to rise to 5.4%, a Reuters poll showed last week, from 3.0% last year, one of its worst performances in nearly half a century because of the pandemic.

The Chinese government has set a target of 5% for economic growth for this year after missing the 2022 target.

In Asian trade, the yield on the benchmark 10-year Treasury rose to 3.5889% compared to the US closing at 3.591% on Monday.

The two-year yield, which rose as traders expected a Fed funds rate hike, came in at 4.1773% compared to the US close of 4.188%.

Elsewhere, Australia’s central bank considered raising interest rates for the 11th time in April before deciding to pause, but was prepared for further tightening if inflation and demand failed to cool down, minutes from the April RBA meeting showed.

In early European trades, futures across the region on the Euro Stoxx 50 were up 0.16% at 4,322, German DAX futures were up 0.13% at 15,951, and FTSE futures were up 0.16% at 7,893. .

US stock futures, the S&P 500 e-minis, fell 0.08% to 4,173.3.

The dollar rose 0.02% against the yen at 134.49, still a distance from its highest level this year at 137.91, which it recorded in March.

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The European single currency rose 0.1% to $1.0929, after rising 0.89% in one month, while the dollar index, which measures the greenback against a basket of other major trading partner currencies, fell to 102.03.

US crude rose 0.27% to $81.05 a barrel. Brent crude rose to $85 a barrel.

Gold was a bit higher with the spot price at $1999.45 an ounce.

Additional reporting by Scott Murdoch in Sydney; Editing by Himani Sarkar

Our standards: Thomson Reuters Trust Principles.

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