Asian shares barely budged on Thursday as investors reacted cautiously to mixed data from China, while the pound hovered near nine-month highs as the risk of a no-deal Brexit receded following a late-night vote.
MSCI’s broadest index of Asia-Pacific shares outside Japan held at 522.06 points.
Japan’s Nikkei rose 0.5 per cent while Australian and New Zealand shares each added 0.2 per cent.
Chinese shares were in the red after data showed the country’s industrial output expanded at the slowest pace in 17 years, although retail sales and fixed asset investment grew by more than expected.
Shanghai’s SSE Composite index stumbled 1.2 per cent while the blue-chip CSI 300 eased 0.4 per cent.
Investors were watching the data for clues about the health of China’s economy after growth cooled to 6.6 per cent last year.
Despite China’s slowing growth, Asian markets have had an impressive rally this year, with the MSCI index climbing about 10 per cent largely after the U.S. Federal Reserve all but abandoned its rate hike plans.
Wall Street was buoyant overnight after U.S. producer prices barely edged higher in February, the latest sign that inflation remained tame and affirming expectations the Federal Reserve would maintain a “patient” approach to future tightening.
Analysts, however, remain skeptical about how much further the share rally would run as slowing global growth, weak corporate earnings and trade tensions between the United States and China hang heavy on risk assets.
“Before we conclude that this market still has decent legs, we’d like to see equity prices supported by stronger macro data, lifted by better earnings trends, and confirmed by stable-to-rising yields,” David Lafferty, chief market strategist at Natixis, said in a note titled ‘Rally vs Reality’.
The state of U.S.-China trade talks also weighed on investors after President Donald Trump said he was in no rush to complete an agreement. Trump and his Chinese counterpart Xi Jinping had been expected to hold a summit at the president’s Mar-a-Lago property in Florida later this month, but no date has been set for a meeting.
Most of the action overnight was in sterling after the British Parliament rejected leaving the European Union without a deal, paving the way for a vote that could delay Brexit until at least the end of June.
The rejection of a no-deal Brexit sent the cable rallying to $1.3380, the highest since June 2018. It jumped 2.1 per cent for its best one-day percentage gain since April 2017 and was last at $1.3315.
Analysts said the real test for sterling was yet to come as lawmakers still need to agree a way forward before an extension on Britain’s exit could be obtained from the European Union.
“If they manage to achieve cross-party support for a deal, likely a ‘softer Brexit’ sort of a deal – this could potentially be very good news for U.K. assets,” said Russel Silberston, Co-Head of Multi Asset at Investec Asset Management.
“If Parliament fails to come to an agreement, it would go to a second referendum. My concern is that this would call into question the role of Parliament and could have serious future political consequences,” Silberston added.
“Sterling is the litmus test for sentiment.”
The euro extended gains for a fifth day in a row to the highest since March 5. It was last at $1.1329.
Wednesday’s vote boosted investor optimism in European equities too, with the pan-European STOXX 600 index climbing 0.6 per cent while London’s FTSE 100 added 0.1 per cent as sterling extended gains.
The dollar index hovered near a seven-day trough hit after the inflation data against a basket of major currencies Against the Japanese yen, the greenback gained slightly to 111.44.
Oil prices extended overnight gains with U.S. crude up 15 cents per barrel at $58.41 and Brent adding 22 cents to $67.77.