Investing.com – Asian markets zig-zagged between mild gains and losses in early morning trade Friday, with Investors weighing the impact of relatively strong data out of China and Japan against renewed fears of a trade war out of the U.S. and the inclusion of Chinese stocks in the MSCI emerging markets index.
The administration of U.S. President Donald Trump surprised partners and allies Thursday by refusing to extend a reprieve on tariffs on imported steel and aluminium while threatening more tariffs on other imported products, including European cars. Those tariffs built on other tariffs that the U.S. had announced earlier in the week on about US$50 billion worth of Chinese imports. Canada, Mexico, Europe and China all said they would retaliate quickly and in kind.
U.S. markets finished down on Thursday. The S&P 500 Index lost 0.69% and the Dow finished down 1.02%, while the tech-heavy Nasdaq gave up 0.27%.
The trade war headlines overpowered the inclusion of Chinese stocks in the MSCI emerging markets index on June 1. There had been expectations that the inclusion would lead managers of index-tracking funds would rebalance their portfolios and shore up foreign investment by about US$10 billion. A group of 230 A-shares – large-cap stocks traded in mainland markets – were added to the MSCI index with a 2.5% partial inclusion factor. More stocks will be added on Sept. 3.
Still, fund managers bought about US$1 billion Chinese stocks on Thursday, mostly through the Shanghai Hong Kong Stock Connect Scheme that links the two markets.
Still, a relatively strong rebound on Thursday after days of losses did not continue into the morning Friday.
The Shanghai Composite and Shenzhen Component were down 0.18% and 0.34% as of 9:40PM ET (01:40 GMT), minutes after the open.
Stocks in Hong Kong opened up and notched up mild gains of 0.15%.
Hong Kong and China stocks closed with solid gains on Thursday, with the Shanghai Composite gaining 1.8%, the Shenzhen Component finishing up 1.88% and the 179|Hang Seng rising 1.37%.
Better than expected numbers from the official Purchasing Managers’ Index (PMI) for May helped shore up stocks in China and Hong Kong. The manufacturing PMI came in at 51.9, higher than expectations of a 51.3 reading. The services PMI came in at 54.9, up from 54.8 in April – a number above 50 signals expansion.
Bourses in Japan, Korea and Australia were mixed.
Japan’s Nikkei 225 was up 0.31%, recovering from earlier losses. Earlier in the week, the Bank of Japan released retail sales numbers that beat expectations and a jobless rate that held steady at 2.5% in April. However, industrial production rose 0.3% in April from a month earlier, falling far short of an expected 1.4% increase.
Holding back further gains in Japan were the results of the Markit/Nikkei Japan Manufacturing Purchasing Managers Index (PMI). Released Friday morning, it came in at 52.8 for May, lower than the 53.8 reading in April. While a number above 50 indicates expansion, the May number was the lowest in seven months for Japan but has remained in expansion territory for 21 consecutive months now. Exports improved, with the export index rising for the first time since January to 51.1 from 50.4 a month earlier.
In Seoul, the KOSPI was up 0.60% while down Under, the ASX 200 was down 0.38%.