Japan Nikkei rises on solid U.S. GDP data, softer yen

Headline indices of the Japan share market were up in afternoon trade on Friday, 1 March 2019, as investors moved to pickup exporters stocks, thanks to weakness in the yen against greenback and solid U.S. gross domestic product (GDP) data. Total 24 subsectors out of 33 subsectors of the Tokyo Stock Exchange inclined, with shares in Fishery, Agriculture & Forestry, Pharmaceutical, Precision Instruments, Securities & Commodities Futures, and Electric Appliances issues being notable gainers, whereas Marine Transportation, Iron & Steel, and Nonferrous Metals issues were notable losers. Around afternoon, the 225-issue Nikkei Stock Average added 189.35 points, or 0.89%, at 21,574.51. The broader Topix index of all First Section issues on the Tokyo Stock Exchange rose 6.21 points, or 0.4%, at 1,613.87.

The U.S. economy grew at 2.6% year on year in the fourth quarter of 2018, down from 3.4% in the previous quarter, the U.S. Commerce Department reported on Thursday.

China's factory activity improved in February but remained in contractionary territory for a third month as the world's second-largest economy continued to struggle with weak export orders, a private survey showed on Friday. The readings - closely watched by investors as an alternative to the official data and more focussed on smaller firms - offered further evidence China's economy is losing momentum and suggests the U.S.-Sino trade war will continue to weigh on exports as prospects for a trade deal remain uncertain. The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) for February rose to 49.9 from 48.3 in January, just below the neutral 50-mark dividing expansion from contraction on a monthly basis. Economists had forecast a sharper deterioration for February of 48.5.

The results of the China's private survey came on the heels of official PMI China released on Thursday which showed manufacturing activity fell for the third straight month, dropping to 49.2 in February from 49.5 in January, according to data released by the country's National Bureau of Statistics. Investors have been closely watching economic indicators from the world's second-largest economy for signs of trouble amid domestic headwinds and the ongoing U.S.-China trade dispute. The manufacturing data come days before China's annual meeting of parliament which starts on March 5. Top officials are widely expected to announce more support measures such as sweeping tax cuts to reduce the strains on the economy. Chinese leaders will also reveal Beijing's key economic and financial targets for the year which may provide clues on their future policy stance. Actual growth in the world's second-largest economy cooled to 6.6% in 2018 the slowest in 28 years from 6.8% in 2017.

On the economic front, the latest survey from Nikkei revealed that the manufacturing sector in Japan fell into contraction in February, with a 32-month low manufacturing PMI score of 48.9. That's down from 50.3 in January, and it slips beneath the boom-or-bust line of 50 that separates expansion from contraction.

The Ministry of Internal Affairs and Communications said that the unemployment rate in Japan came in at a seasonally adjusted 2.5% in January, unchanged from the December reading. The job-to-applicant ratio was 1.63, unchanged from the previous month. The participation rate was at 61.2%, down from 61.4% a month earlier.

The Ministry of Finance said capital spending in Japan climbed 5.7% on quarter in the fourth quarter of 2018, unchanged from the third quarter. Excluding software, capex advanced 5.5% - up from 2.5% in the three months prior.

CURRENCY NEWS: The Japanese yen depreciated against the dollar in the lower 111 yen zone on Friday. The dollar was quoted at 111.38-39 yen compared with 111.33-43 yen in New York and 110.75-76 yen on Thursday in Tokyo. The euro, meanwhile, fetched 126.67-71 yen against 126.67-77 yen in New York and 126.05-09 yen in late Thursday afternoon trade in Tokyo.

OFFSHORE MARKET NEWS: US share market fell slightly on Thursday as support from better-than-feared US GDP data was countered by concerns about earnings and US-China trade relations. Investors were also unimpressed by White House economic adviser Larry Kudlow's assurance Thursday that US-China trade negotiations were moving forward after fantastic progress made last week. Also on Thursday, President Donald Trump said he had walked out of his Vietnam summit with Kim Jong Un because of demands from the North Korean leader to lift US-led sanctions. The U.S. economy grew at 2.6% year on year in the fourth quarter of 2018, down from 3.4% in the previous quarter, the U.S. Commerce Department reported on Thursday. The Dow Jones Industrial Average fell 69.16 points, or 0.27%, to 25,916, the S&P 500 lost 7.89 points, or 0.28%, to 2,784.49 and the Nasdaq Composite dropped 21.98 points, or 0.29%, to 7,532.53.

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