Asia markets mixed as investors assess Japan's inflation data; eyes on Fed chair Powell's speech
Asian markets showed mixed performance influenced by declines in U.S. tech stocks and anticipation of Federal Reserve Chair Jerome Powell's upcoming remarks, with Japanese equities fluctuating and inflation data exceeding expectations.
China's markets experienced significant growth due to expectations of government stimulus and strong retail investment, with the Shanghai Composite Index and Shenzhen Component both rising, while India's BSE Sensex dipped as traders awaited Powell's speech.
Australia reported its fastest expansion in private sector activity since April 2022, with notable growth in manufacturing and services, although the ASX 200 index slipped below a key high.
Japan's core consumer inflation hit 3.1% year-on-year in July, indicating sustained economic pressures, as financial authorities plan to raise long-term government bond rates to their highest level in 17 years.
Market Analysis Rating: Moderate Sentiment with Mixed Trends
Asian markets demonstrated a mixed performance on Friday, reflecting a decline in Wall Street due to ongoing sell-offs in technology stocks and the anticipation surrounding comments from Federal Reserve Chair Jerome Powell. Japanese equities displayed varied results, responding to newly released data indicating that Japan's consumer inflation continues to exceed the Bank of Japan’s annual target.
Attention is firmly focused on Jerome Powell's address at the Jackson Hole Symposium later today, which is expected to offer further insights into U.S. monetary policy.
In commodities, silver remained resilient, trading firmly above $38 per ounce after experiencing two consecutive sessions of gains. Conversely, gold extended its downward trend, settling around $3,330 per ounce on Friday.
Japanese equities experienced minor fluctuations, with the Nikkei 225 Index (NKY:IND) declining by 0.10% to below 42,600, while the Topix Index rose by 0.4% to reach 3,095, reflecting a market characterized by uncertainty. The Japanese yen weakened to approximately 145.5 against the dollar, marking its lowest point in three weeks as traders reacted to recent inflation data.
Japan’s core consumer price index saw a year-on-year increase of 3.1% in July, slightly down from June's 3.3%, yet still surpassing the anticipated 3%. Food prices surged by 7.6% year-on-year in July 2025, up from 7.2% in June, indicating the steepest increase since February.
In a separate update, Japan’s Ministry of Finance plans to raise its projected interest rate for long-term government bonds to 2.6% in its fiscal 2026/27 budget requests, marking the highest level seen in 17 years, as reported by Reuters, citing the Yomiuri Shimbun.
Chinese markets displayed robust growth, with the Shanghai Composite Index (SHCOMP) rising by 0.66% above 3,780, while the Shenzhen Component climbed by 0.6% to 11,990. The latter reached a new decade high thanks to strong fund rotations and an influx of retail investment. Improved market sentiment was bolstered by expectations of fresh economic stimulus measures from Beijing following a slowdown in China’s economy during July. Starting in September, the Chinese government will introduce a one-year consumer loan subsidy, which will cover 90% of interest costs, with local authorities contributing the remainder.
In Hong Kong, the Hang Seng Index (HSI) rose by 0.25% to 25,191 in early trading, benefiting from gains across most sectors.
In India, the BSE Sensex (SENSEX) fell by 0.61% to 81,630 amidst a cautious atmosphere as traders await Powell's speech at the Jackson Hole Economic Symposium. This dip halted a six-day winning streak driven by optimism concerning Goods and Services Tax reforms. The Indian rupee held steady in its recent decline at approximately 87.26 per USD.
India's exports to China experienced a substantial recovery, increasing by 20.0% year-on-year to reach $5.8 billion over the first four months of FY 2025-26 (April–July), a significant rebound after a 4.5% decline during the same period in FY 2024-25.
Elsewhere, Australia’s ASX 200 (AS51) slipped by 0.37%, dipping below the crucial 9,000 mark—a record high achieved just in the previous session. The Australian dollar remained relatively stable at around $0.642, ending its four-day losing streak, but was still on track for a 1.3% decline for the week, marking its second consecutive weekly drop.
Australia's private sector activity expanded at the fastest rate since April 2022, with the composite Purchasing Managers' Index (PMI) rising to 54.9 in August, compared to 53.8 in July. This increase was driven by notable growth in both the manufacturing (52.9 versus 51.3) and services sectors (55.1 versus 54.1).
In the U.S., all three major stock indexes closed lower on Thursday, with the S&P 500 dropping 0.4%, marking its fifth consecutive decline as investors awaited Powell's speech. However, stock futures showed slight increases on Friday, with Dow futures rising by 0.02%, S&P 500 futures up by 0.01%, while Nasdaq futures dipped by 0.08%.
Currency movements observed include fluctuations in the Japanese yen (JPY), Chinese yuan (CNY), Australian dollar (AUD), Indian rupee (INR), Hong Kong dollar (HKD), and New Zealand dollar (NZD).
In summary, notable highlights from Asia include:
- Japan's core inflation rate exceeding forecasts at 3.1% YoY in July.
- Expansion in Japan's manufacturing sector, which shrank less than anticipated, with a PMI of 49.9 in August, while services growth eased to 52.7.
- Australia showcasing the strongest growth in its manufacturing and services sectors in nearly three years.
- The People’s Bank of China (PBOC) maintaining lending rates at record lows for the third consecutive month.
- A 0.3% acceleration in Japan's economy for Q2, outperforming forecasts.