Asian shares were mostly higher on Tuesday even though the latest data showed China’s economy is weaker than expected, with domestic demand failing to bounce back as much as hoped for after the pandemic.
Benchmarks advanced in Tokyo, Hong Kong and Seoul but fell in Shanghai and Sydney.
China’s industrial output rose 5.6% year-on-year in April while investment crept up 4.7% from the year before in January-April. But those increases also reflected a big gap from the slow activity at the height of China's “zero-COVID” restrictions, which Beijing abandoned late in 2022.
“While the boost from reopening should still underpin a further recovery in the near-term, the bulk of China’s rebound is now behind us,” Julian Evans-Pritchard of Capital Economics said in a report.
He said the post-pandemic recovery was likely to “fizzle out” in the second half of the year. “Meanwhile, the challenging global picture will prevent much pick-up in Chinese exports,” he said.
Tokyo's Nikkei 225 index surged 0.9% to 29,899.83 continuing a climb toward its highest level since the early 1990s helped by strong corporate earnings and signs that inflationary pressures might be easing.
The Hang Seng in Hong Kong gained 0.4% to 20,044.72, while the Shanghai Composite index was nearly unchanged, at 3,311.06.
In Seoul, the Kospi rose 0.3% to 2,485.58, while Australia's S&P/ASX 200 slipped 0.2% to 7,251.20.
On Monday, the S&P 500 rose 0.3% to 4,136.28 and the Dow Jones Industrial Average edged 0.1% higher, to 33,348.60. The Nasdaq composite climbed 0.7% to 12,365.21.
Some of the sharper moves came from companies announcing takeovers of rivals, including a 9.1% drop for energy company Oneok after it said it’s buying Magellan Midstream Partners. Magellan jumped 13%.
But market was relatively quiet as several concerns dragged on sentiment.
A chief one is the fear of a recession hitting later this year, mainly because of high interest rates meant to knock down inflation. Cracks in the U.S. banking system and the U.S. government’s inching toward a possible default on its debt as soon as June 1 are added worries.
So far, a resilient job market has helped U.S. households keep up their spending despite all the pressures. That in turn has offered a powerful pillar to prop up the economy. On Tuesday, the government will show how much sales at retailers across the country grew last month.
Several big retailers — Home Depot on Tuesday, Target on Wednesday and Walmart on Thursday — will give updates on their earnings in the first quarter of the year.
The majority of companies in the S&P 500 have topped expectations so far but overall they are on track to report a drop of 2.5% in earnings per share from a year earlier. That would be the second straight quarter they’ve seen profit drop, according to FactSet.
Looming ahead is the risk of the federal government's first-ever default if Congress doesn’t raise the credit limit set for federal borrowing.
Most investors expect Democrats and Republicans to come to a deal, simply because the alternative would be so disastrous for both sides. U.S. Treasurys form the bedrock of the global financial system because they’re seen as the safest possible investment on the planet.
But one worry is that politicians may not feel much urgency to reach an agreement until financial markets shake sharply to convince them of the importance.
In other trading Tuesday, U.S. benchmark crude oil picked up 32 cents to $71.43 per barrel in electronic trading on the New York Mercantile Exchange. It gained $1.07 on Monday, to $71.11 per barrel.
Brent crude oil, the international pricing standard, gained 33 cents to $75.55 per barrel.
The dollar slipped to 136.01 Japanese yen from 136.12 yen. The euro rose to $1.0881 from $1.0875.