Asia Market Report

Asia: Deflation and Europe jitters weigh

Date: Thursday 20 May 2010
The Nikkei fell 1.2% as the Euro’s recovery against major currencies faded and Japanese GDP figures fell short of analysts' expectations. Sentiment continued to be rattled by Germany's ban on some bets against government bonds.

Japanese GDP rose 1.2% in the last quarter and rose at an annual rate of 4.9% in the January March period, according to new figures from the Cabinet Office today. Analysts had pencilled in annual GDP growth of 5.5%.

Growth was driven by robust exports and a recovery in domestic demand, the report showed. However it added there was pressure from deflation. Japan’s consumer prices, excluding fresh food, fell 1.2% in March from the same time a year earlier.

Exporters came under pressure as the euro lost its grip on yesterday’s recovery. Canon was down 2.93%, Sony lost 1.96% while Toyota lagged 2.56%. Nintendo dragged 3.2% to 25,990 yen.

Property firm Mitsui Fudosan slumped 4% while Mitsubishi Estate declined 3% to 1,498 yen. Meanwhile retailing giant Seven & I lost 2% in a nervous market.

The benchmark Nikkei 225 index settled down 156 points at 10,030 in Tokyo.

The Hang Seng fell on Thursday with a mixed performance for banks and real estate. Bank of China was up 0.51%, HSBC slipped 0.42% while ICBC lost 0.73%.

Sun Hung Kai Properties dropped 1.76% in Hong Kong.

The Hang Seng index closed 33 points lower at 19,546.