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Aug 8, 2016

Asian Markets Closing Report, by MarketWatch on August 8, 2016: Japanese Stocks Leads Jump in Asian Markets

Kenan Machado

Strong U.S. jobs data sent Asian stock markets higher on Monday, with the yen’s decline driving sharp gains in Japan’s Nikkei Stock Average.
The Nikkei NIK, +2.44%   jumped 2.4% while Australia’s S&P/ASX 200 XJO, +0.73%   was up 0.7%. Hong Kong’s Hang Seng Index HSI, +1.57%   rose 1.6%, and South Korea’s Kospi SEU, +0.65%   rose 0.7%.
In China, the Shanghai Composite Index SHCOMP, +0.93% added 0.9%, thanks to a surge in coal stocks after data showed China succeeded in cutting output in the first half. Stocks also rallied after the banking regulator expressed support for debt-to-equity swaps at large steel and coal companies, which would prop up those weakened by the multiyear collapse in coal and steel prices.

Japanese Emperor Akihito commented on national television Monday about his ability to carry out his duties fully as he ages. Photo: Associated Press
The gains in China’s broader market came despite weaker economic news. Official data on Monday showed China’s July exports in dollar terms were down 4.4% from a year earlier, following a 4.8% decline in June. A Wall Street Journal poll had pointed to a 3.6% decline.
“I am not surprised at all in terms of the export performance,” said Chi Lo, Greater China economist at BNP Paribas Investment Partners. China is feeling the effects of declining demand from developed economies, a consequence of global economic weakness, he said.
July imports were off a bigger-than-expected 12.5% from a year earlier, compared with an 8.4% fall in June. Imports have been weaker than expected for the past few months, said Lo. “Chinese economic growth momentum is still weakening,” he notes.
Earlier in the day, traders took cues from strong U.S. jobs data to push up Asian markets.
Nonfarm payrolls in the U.S. registered better-than-expected gains in July showing signs of stability in the economy there. Analysts said the number though isn’t strong enough to signal higher interest rates.
The upbeat U.S. data led to dollar gains against the yen Monday, lifting the share prices of major financial firms and exporters in Japan. A weaker yen helps Japanese exports. The dollar-yen USDJPY, +0.57%  as last at ¥102.24 in late Asian trade, compared with ¥101.81 late Friday in New York.
Japan’s share gains were well supported by the Bank of Japan’s continuing purchases of exchange-traded funds, boosting thin summertime trading volumes in Tokyo.
“Because there is no summer vacation for the BOJ’s buying operations, the effects will likely be felt even larger in the market,” said Daiwa Securities chief technical analyst Eiji Kinouchi.
Among key Japanese stocks, Toyota Motor Corp. 7203, +3.33%   was up 3.3% and Honda Motor Co. 7267, +3.37%  added 3.4%. Nomura Holdings Inc. 8604, +5.15%   rose 5.2%, while Sumitomo Mitsui Financial Group Inc. 8316, +5.27%   gained 5.3%.
In currency markets, the South Korean won USDKRW, -0.69%  , after spending most of the day down against the dollar, recovered to trade higher following an upgrade of the country’s sovereign credit rating by Standard & Poor’s. The currency has risen 3.6% against the dollar over the past month.
In Australia, analysts are factoring in another rate cut in November by the Reserve Bank of Australia, which last week cut its cash rate by a quarter of a percentage point to a record low of 1.5%—helping lift local shares.
“If September-quarter inflation rate remains very low, as we expect, and the [U.S.] Fed remains in ultra-gradual mode regarding rate hikes, as we also expect, then the RBA will cut again in November,” said AMP Capital chief economist Shane Oliver.