Asia Equities Mixed; Nikkei 225 Up 0.61%, Japan GDP Misses Forecasts

Lead Asian equities closed mixed today, with the Nikkei 225 rising 0.61% while New Zealand stocks fell 0.7%. Japan's Q2 GDP growth of 0.3% QoQ missed the 0.5% forecast, indicating a slowdown in the economy. Geopolitical tensions in the Middle East persist, impacting oil prices and shipping through the Strait of Hormuz, with UK natural gas prices jumping above 154p/therm. The Australian dollar strengthened to a ten-week high against a weaker US dollar. Session narrative Today's Asian trading session saw a mixed bag for equities. Japan's Nikkei 225 managed to close up 0.61%, despite fresh economic data showing a weaker-than-expected performance. Japan's Q2 real GDP grew by 0.3% quarter-on-quarter, falling short of the 0.5% forecast. Private consumption was stagnant, and capital expenditure for April-June declined by 1.2% QoQ. In contrast, New Zealand stocks dropped 0.7%, primarily due to underperforming consumer shares. China's central bank took action by injecting 565.5 billion yuan through overnight reverse repos, and the yuan midpoint was set at its strongest level since February 2023. This comes as iron ore futures are falling towards CNY 700, reflecting ongoing concerns about demand in China. Geopolitical developments in the Middle East continue to be a significant market driver. Reports of tanker assaults have slowed transits through the Strait of Hormuz, contributing to a surge in UK natural gas prices above 154 pence a therm and pushing US heating oil near a four-month high. Despite these energy price increases, WTI crude was down 0.81% and Brent crude fell 0.26%. On the currency front, the Australian dollar climbed above $0.709, reaching a ten-week high, supported by a hawkish stance from the Reserve Bank of Australia and a general weakening of the US dollar as traders reduce expectations for Fed rate hikes. US equity futures are mixed, with S&P futures up 0.15% and Nasdaq futures up 0.44%. Cross-asset check In currencies, the US Dollar Index is down 0.17%, with EUR/USD up 0.19% and GBP/USD up 0.14%. USD/JPY is down 0.16%. Commodities saw WTI crude down 0.81% to $81.73 and Brent crude down 0.26% to $88.29. Gold is up 0.34%, and silver gained 1.24%. Copper is up 1.73%, while natural gas is down 2.96%. In rates, the US 10-year yield is up 1.18% to 4.7%. Themes & continuing stories Geopolitical tensions in the Middle East remain a dominant theme, directly impacting energy markets and shipping routes. The ongoing concerns about China's economic health and demand continue to weigh on commodity prices like iron ore. Central bank actions, particularly from China's central bank and the Reserve Bank of Australia, are influencing currency movements. The broader narrative of shifting Federal Reserve expectations and their impact on the US dollar is also a key continuing story. What’s ahead Looking ahead, Keysight Technologies (KEYS) is scheduled to report its third-quarter earnings after the closing bell on Tuesday. Analog Devices (ADI) will release its third-quarter earnings on August 19. Additionally, markets will be closely watching for Bank Indonesia’s first policy meeting since Perry Warjiyo’s departure last month, which could provide further direction for the Indonesian rupiah.