Asian stocks drift lower amid mixed China PMIs; rate uncertainty persists

Most Asian stocks moved in a flat-to-low range on Monday as investors digested mixed cues on Chinese business activity, while uncertainty over U.S. interest rates remained in play.

Regional markets took weak cues from a negative close on Wall Street on Friday, as quarter-end profit-taking largely offset some increased expectations for rate cuts by the Federal Reserve.

U.S. stock index futures were mildly positive in Asian trade, although investors remained on edge before an address by Fed Chair Jerome Powell, the minutes of the Fed’s June meeting, and nonfarm payrolls data for more cues on interest rates.

Chinese stocks fall on mixed PMIs
China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes shed 0.5% and 0.2%, respectively, after government and private purchasing managers index readings gave differing cues on the economy.

Government data released on Sunday showed China’s manufacturing sector shrank for a second consecutive month in June. But by contrast, a private PMI reading on Monday showed the sector expanding at its fastest pace in three years.

While the two readings differ in their scope of companies covered, they still painted two contrasting pictures of Asia’s largest economy, which kept investors uncertain over its economic prospects.

Chinese markets were already nursing steep losses through June, having tumbled from their 2024 peaks as slowing stimulus measures from Beijing saw sentiment sour towards the country.

Focus in July is on the third Plenum of the Chinese Communist Party, a meeting of top officials where the government is likely to outline more economic support.

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Broader Asian markets retreated amid some uncertainty over China. Australia’s ASX 200 fell 0.4%, while South Korea’s KOSPI was flat.

Hong Kong markets were closed for a holiday.

Futures for India’s Nifty 50 index pointed to a slightly negative open, with the index set for some profit-taking after hitting a series of record highs through June.

Japanese stocks edge higher, GDP revised lower
Japan’s Nikkei 225 and TOPIX indexes rose about 0.3% and 0.4%, respectively.

The two trimmed a bulk of their early gains after the government unexpectedly revised first quarter gross domestic product data to show a much deeper contraction than initially expected.

The reading highlighted growing cracks in Japan’s economy, which could present headwinds for company earnings in the coming months.

But a weaker economy also presents the possibility that the Bank of Japan will keep interest rates low for longer, which bodes well for local stock markets.