Asian stocks gained after data showed inflation in China beat expectations, boosting optimism about the strength of the worlds second-largest economy. Thailands market will be closely watched following the death of King Bhumibol Adulyadej, the worlds longest-reigning monarch.
The MSCI Asia Pacific Index added 0.2 percent to 138.16 as of 10:52 a.m. in Tokyo, erasing earlier declines of as much as 0.2 percent. The measure is on course for a 1.8 percent drop this week as investors weigh the prospects of a Federal Reserve interest rate increase. Chinas producer prices in September rose for the first time since 2012, surprising economists who had forecast a decline, while consumer prices also gained more than estimated. Investors are waiting for Thailands equity market to open after King Bhumibols death was announced on Thursday evening in Bangkok.
The turn up in China PPI is indicative of receding deflation risks globally, said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which oversees about $121 billion. Its another sign that global deflation is fading. Todays data was certainly a lot stronger than I thought it would be.
Hong Kongs Hang Seng Index added 0.5 percent, while the Shanghai Composite Index slipped 0.3 percent. Chinas producer-price index rose 0.1 percent in September from a year earlier, the National Bureau of Statistics said Friday, compared with a 0.3 percent drop estimated by economists in a Bloomberg survey. The consumer-price index rose 1.9 percent, while analysts had forecast a 1.6 percent increase.
Years of deflation for Chinas factories has abated as global commodity prices recover and domestic demand stabilizes on the back of past stimulus. Still, with external demand tepid, the currency has slipped to a six-year low as growth clouds remain.
Thailands stock market rebounded with the currency on Thursday, closing higher before the kings death was announced, while the iShares MSCI Thailand Capped ETF climbed by the most since February in the U.S. Earlier in the week, Thai assets had tumbled after the royal palace said Sunday that King Bhumibols health was unstable. Futures on the SET Index gained 3.4 percent on Thursday.
Short-term investor confidence has been and could remain shaken, Jingyi Pan, a market strategist at IG Asia Pte in Singapore, said before the kings death was announced on Thursday. Defensive stocks may appear appealing in the near term given the reaction of the markets, while a smooth transition could help to trigger a reversal in the battered SET index.
Japans Topix index climbed less than 0.1 percent while Australias S&P/ASX 200 Index gained 0.2 percent. New Zealands S&P/NZX 50 Index erased losses to trade little changed, and South Koreas Kospi index added 0.6 percent.
U.S. Volatility
Futures on the S&P 500 Index were little changed. The underlying measure lost 0.3 percent on Thursday in a volatile session amid fresh concern that tepid global growth will weigh on the American economy. The CBOE Volatility Index, a gauge of U.S. stock options prices, climbed to the highest level in a month.
Equity investors will be watching earnings reports on Friday from JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. for clues on the health of the worlds largest banks as the U.S. reporting season ramps up.