Asian shares fell as upbeat Chinese data failed to impress

SYDNEY, April 18 (Reuters) – Asian shares weakened on Tuesday, brushing off an early lift from better-than-expected Chinese economic data as signs of a slowdown in the country’s recovery hurt investor sentiment.

MSCI’s broadest index of Asia-Pacific shares outside Japan ( .MIAPJ0000PUS ) fell 0.5%, a deeper loss than the previous day’s 0.27%.

China’s economy grew 4.5% year-on-year in the first quarter, eclipsing most economists’ expectations.

The currencies of Australia and New Zealand, which depend on demand for exports from China, both rose after the GDP data.

Despite some early momentum in broader markets, the better-than-expected data failed to spark a sustained rally in regional stocks.

Hong Kong’s Hang Seng Index (.HSI) fell 0.85% on Tuesday, dragged down by consumer and technology stocks. China’s bluechip CSI300 index (.CSI) was barely higher as it rose 0.08%.

Australian shares ( .AXJO ) were down 0.45%. Japan’s Nikkei stock index (.N225) was the best performer in the region as it rose 0.55%.

Despite the strong headline results, analysts said the mixed market performance resulted from some fundamental Chinese data falling below expectations.

Separate data on Chinese activity released on Tuesday showed factory output accelerating, but fixed asset investment growth unexpectedly slowed.

“The headline number was a positive surprise and overall it was a good set of numbers, albeit inconsistent, which is reflected in the markets’ response,” said David Chau, global market strategist for Asia Pacific at Invesco.

“The market’s thesis is that China is coming out of the pandemic and growth will be driven by consumption. While the recovery is on track, I don’t think economic growth will exceed expectations from what we’ve seen so far.”

Zhou said weak property investment in the quarter meant the troubled sector had not recovered and could hold back China’s economic growth this year.

“I think the numbers show that the 5% growth target will be met, but how much growth beyond that will continue to be in the property market,” he said.

GDP growth is expected to rise to 5.4% in 2023, a Reuters poll last week showed, down from 3.0% last year, one of its worst performances in nearly half a century due to the pandemic.

China’s government has set a target of 5% economic growth for this year after missing the 2022 target.

In Asian trade, the yield on the benchmark 10-year Treasury note rose to 3.5889% on Monday, compared with its US close of 3.591%.

Two-year yields touched 4.1773%, compared with a US close of 4.188%, rising on traders’ expectations that the Fed funds rates will be higher.

Elsewhere, Australia’s central bank considered raising rates for an 11th time in April before deciding to pause, but is prepared to tighten further if inflation and demand fail to ease, minutes of the Reserve Bank of Australia’s April meeting showed.

In early European trade, Euro STOXX 50 futures were up 0.16% at 4,322, German DAX futures were up 0.13% at 15,951 and FTSE futures were up 0.16% at 7,893.

US stock futures, the S&P 500 e-minis, were down 0.08% at 4,173.3.

It rose 0.02% to 134.49 against the dollar, still some distance from the 137.91 hit in March this year.

The European single currency rose 0.1% to $1.0929, up 0.89% in a month, and the dollar index, which tracks the greenback against a basket of other major trading partners’ currencies, fell to 102.03.

US crude oil rose 0.27% to $81.05 a barrel. Brent crude rose to $85 a barrel.

Gold prices rose slightly to $1999.45 an ounce.

Reporting by Scott Murdoch in Sydney; Editing by Himani Sarkar

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