Asian shares fall as upbeat Chinese data fails to impress

SYDNEY, April 18 (Reuters) – Asian shares weakened on Tuesday, shrugging off an initial boost from better-than-expected Chinese economic data as signs of unevenness in the country’s recovery weighed on investor sentiment.

MSCI̵[ads1]7;s broadest index of Asia-Pacific shares outside Japan ( .MIAPJ0000PUS ) fell 0.5%, a deeper loss than earlier in the day when it was down 0.27%.

China’s economy grew 4.5% year-on-year for the first quarter, beating the expectations of most economists.

The currencies of Australia and New Zealand, whose exports depend on Chinese demand, both rose higher after the GDP data.

Despite some initial 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 share index (.N225) was the standout performer in the region as it rose 0.55%.

Analysts said the mixed market performance was a result of some underlying Chinese data falling short of expectations, despite the strong headlines.

Separate data on Chinese activity also released on Tuesday showed factory output rose but missed expectations while growth in plant investment unexpectedly slowed.

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

“The thesis that the market has that China will emerge from the pandemic and that growth will be driven by consumption is still intact. Although the recovery is on track, I do not think economic growth from what we have seen so far exceeds expectations too much.”

Chao said weaker property investment during the quarter showed the troubled sector had not recovered and could again hold back China’s economic growth this year.

“I think the numbers show today that the 5% growth target will be met, but how much growth exceeds that will depend on the property market,” he said.

For 2023, GDP growth was expected to pick up to 5.4%, a Reuters poll showed last week, from 3.0% last year, which was one of the 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% compared with the US close of 3.591% on Monday.

The two-year yield , rising on traders’ expectations of higher Fed funds rates, hit 4.1773% compared with a US close of 4.188%.

Elsewhere, Australia’s central bank considered raising interest rates for an 11th time in April before deciding to pause, but was poised to tighten further if inflation and demand failed to cool, minutes from the Reserve Bank of Australia’s April meeting showed .

In early European trade, Euro Stoxx 50 futures in the pan region were up 0.16% at 4,322, German DAX futures were up 0.13% at 15,951, FTSE futures were up 0.16% at 7,893.

U.S. stock futures, the S&P 500 e-minis, fell 0.08% to 4,173.3.

The dollar rose 0.02% against the yen to 134.49, still some way off the year’s high of 137.91 in March.

The European single currency rose 0.1% to $1.0929, after rising 0.89% on the month, while the dollar index, which tracks the greenback against a basket of currencies from other major trading partners, was down at 102.03.

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

Gold was slightly higher with the spot price at $1,999.45 an ounce.

Reporting by Scott Murdoch in Sydney; Editing by Himani Sarkar

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