MarketsECB rally a no-show in Asia Pacific

Markets across Asia Pacific were reasonably muted in the final session of the week, with worse than expected wage data weighing on Japanese stocks and Chinese markets still closed for a national holiday. Japan’s Nikkei is down 1.1 per cent, weighed by lacklustre wage growth data for July boding ill for hopes that consumer spending will revive the economy. Labour cash earnings, a measure of total compensation, rose 0.6 per cent year-on-year, short of economists’ expectations of 2 per cent growth. Real cash earnings – wages adjusted for inflation – rose 0.3 per cent but the year-on-year decline recorded for June widened to a revised 3 per cent drop.

“With the tight labour market failing to create strong wage gains, the Bank of Japan still has more work to do,” said Marcel Thieliant, Japan economist at Capital Economics, noting that stronger price pressures are needed to help Japan battle deflation.

Among the biggest fallers were Shiseido, whose shares fell as much as 3.2 per cent in the morning session, and SoftBank, whose shares fell as much as 3.6 per cent after analysts at Barclays cut their rating on the telecoms group to underweight from overweight. Hong Kong’s Hang Seng is up 0.3 per cent, following a public Discount Holidays © holiday on Thursday. The standout performer was Belle International Holdings, the biggest women’s footwear company in China, which was up 6 per cent, having jumped as 11 per cent earlier in the session. Elsewhere in the region Korea’s Kospi is down 0.4 per cent.

In Australia the S&P/ASX 200 was up 0.6 per cent, shares having had a bumpy ride during the Thursday session when they traded in the second-widest intra-day range of the year so far. Metal and mining companies were the biggest gainers on Friday, led by BHP Billiton and Rio Tinto after their London shares jumped 4.3 per cent and 3.3 per cent, respectively. Investors turned optimistic after Rio, the world’s largest producer of iron ore Australia’s top export and the key ingredient for making steel predicted that China’s production of steel would continue to increase even as the economy slows. The Aussie mining sector was up 2.4 per cent as a whole even though the price of iron ore slipped overnight and the price of gold was flat at $1,124.36 an ounce.

In other commodities, Brent Crude was down 0.2 per cent to $50.59 a barrel and West Texas Intermediate was down 0.3 per cent to $46.64. Chinese markets are closed for a national Discount Holidays © holiday marking the 70th anniversary of the end of the second world war. On Wednesday the Shanghai Composite closed down 0.2 per cent and the Shenzhen Composite closed down 2 per cent. Overnight the S&P 500 and Dow Jones Industrial Average both closed 0.1 per cent higher, while the Nasdaq Composite declined 0.4 per cent.

Investors are cautious ahead of Friday’s critical non-farm payrolls report, which could have a major effect on whether the Federal Reserve lifts interest rates later this month. The biggest news for investors late on Thursday was commentary from the European Central Bank leaving the door open to further monetary stimulus should the eurozone’s economic recovery be threatened, news which pushed major European markets higher by about 2 per cent. ECB chief Mario Draghi indicated it stood ready to extend the “size, composition and duration” of its ‘ 1.1tn bond-buying programme, as the central bank cut its inflation and growth forecasts for this year through to 2017.

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