Asia stocks flat with focus on US trade talks, Japan firms past weak spending data

Investing.com-- Most Asian stocks moved in a tight range on Friday as investors awaited more cues on trade talks between the U.S. and major regional economies, especially China.

Japanese shares outperformed after a series of weak readings on consumer spending spurred bets that the Bank of Japan will not have enough headroom to raise interest rates further. 

Chinese markets were little enthused by U.S. President Donald Trump flagging a positive call with Chinese President Xi Jinping, which is expected to help revitalize trade negotiations. 

Broader regional markets kept to a tight range, taking a weak lead-in from Wall Street after a growing public feud between Elon Musk and Trump battered Tesla (NASDAQ:TSLA) and other technology stocks. Shares of some Asian suppliers of Tesla were also impacted. 

U.S. markets were also on edge before key nonfarm payrolls data due later on Friday, which is likely to show more signs of cooling in the world’s largest economy. S&P 500 Futures rose marginally in Asian trade. 

Indian markets were lifted by a bigger-than-expected cut by the Reserve Bank, although the central bank did flag persistent economic risks. 

Japan’s Nikkei rises as soft spending data deters BOJ rate hike bets 

Japan’s Nikkei 225 and TOPIX indexes were the best performers in Asia on Friday, rising 0.5% and 0.6%, respectively. 

The two were boosted by increased bets that the BOJ was losing headroom to hike interest rates further, especially after household spending data for April read substantially weaker than expected.

Friday’s reading followed weaker-than-expected overall wage income data, which signaled that private spending may not receive as big a boost from recent wage hikes as initially expected.

This trend could in turn undermine Japanese economic growth and inflation, giving the BOJ less headroom to raise interest rates further.

On the trade front, Japanese talks with the U.S. remained ongoing, although media reports said discord between U.S. officials was presenting difficulties. 

China stocks flat even as Trump flags positive talk with Xi 

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes moved sideways, while Hong Kong’s Hang Seng shed 0.4%. 

Chinese markets appeared to be taking little support from Trump flagging a positive call with Xi, with investors likely holding out for a more permanent trade deal. 

Still, the Trump-Xi call is expected to revitalize Sino-U.S. trade talks, which Washington said had stalled in recent weeks, after the U.S. and China agreed to temporarily lower their respective tariffs in May. 

Recent economic readings also underscored the economic impact of a bitter U.S. trade war on the Chinese economy, with the country’s manufacturing sector under pressure. 

Broader Asian markets were rangebound. Australia’s ASX 200 fell 0.1% as it faced resistance near record high levels.

Indian stocks reverse losses after outsized RBI cut

India’s Nifty 50 index reversed initial losses and rose 0.5%, after the RBI cut interest rates by a bigger-than-expected, 60 basis points. The RBI also unexpectedly slashed its cash reserve ratio-- which dictates the amount of cash to be held by local banks as reserves-- to 3% from 4%. 

The central bank shifted its stance to ’neutral’ from ’accommodative,’ flagging persistent risks to the Indian economy from global trade and economic ructions. 

But RBI Governor Sanjay Malhotra flagged resilience in the Indian economy, maintaining the RBI’s forecast for gross domestic product growth of 6.5% in the current fiscal year. Malhotra cut the RBI’s consumer price index inflation forecast for the current year to 3.7% from 4%.