Japan Unexpectedly Slips Into Recession; India's Current Account Deficit Shrinks

Arjun Pandit
14 Feb, 2024
Mumbai

Market indexes in Asia drifted sideways after Japan unexpectedly fell into a technical recession and Japan's economy slipped to fourth place, lagging the German economy by a small margin. 

The Nikkei index advanced 1% to 38,073.91, and the Topix index added 0.2% to 2,589.88. 

The yen traded above 150 against the U.S. dollar for the second day in a row this week and for the first time since November, prompting more verbal intervention from Japanese officials.

The yen has declined more than 6% against the U.S. dollar so far in 2024. 

Investors have been selling the Japanese yen on the worry that U.S. interest rates are likely to stay higher for longer after the release of the latest inflation data, expanding the yawning yield gap between Japanese government bonds and U.S. Treasury bonds. 

Renesas Electronics Corp. decreased 1.2% to ¥2,568.50 after the Japanese chip maker announced the acquisition of the Australian-listed software firm Altium for $5.9 billion. 

 

Japan Falls Behind Germany

Japan's economy unexpectedly shrank by 0.1% from the previous quarter in the fourth quarter of 2023. 

The GDP in the third quarter was revised to a contraction of 0.3%, the Cabinet Office reported Thursday. 

The economy dipped into a recession after private consumption, which accounts for more than half of the economy, declined for the third quarter in a row on elevated costs. 

The weakness of government spending and capital expenditure overcame the net positive contribution from international trade. 

Japan's GDP slipped to the fourth largest in the world, trailing the U.S., China, and Germany. 

China's GDP surpassed Japan's in 2010, and India's economy is forecasted to surpass the economies of Japan and Germany by as early as 2028. 

 

Hong Kong Stocks Face Persistent Downward Pressure

Investors remained hesitant about investing in Chinese stocks, and most regional investors are looking to trim holdings with any sign of a rebound, according to a survey published by Bank of America on February 13.  

The global bank conducted a survey of institutions managing about $313 billion between February 2 and 8. 

The Hang Seng index increased 0.4% to 15,947.63, and stocks advanced for the second day in a row in the hopes that Chinese government-controlled funds will step up buying. 

Market sentiment reversed in the afternoon session after indexes dropped as much as 0.6% in early trading. 

Alibaba Group, JD.com, Tencent, Baidu, and Meituan jumped between 0.1% and 3.0%. 

Property developers struggled in trading, and Longfor Group, China Vanke, and China Resources Land declined between 1% and 2.5%. 

Financial markets in mainland China are closed this week to celebrate the Lunar New Year. 

Chinese stocks have lost about $5 trillion in market capitalization over the three years to 2023, and indexes have extended losses by another 5% in 2024. 

 

India Stocks Lacked Direction In Volatile Trading

Stocks in Mumbai opened higher in early trading and extended the previous day's gains. 

The Sensex and the Nifty indexes advanced by 0.2% following the rebound in market indexes in overnight trading in New York and Europe after bond yields eased. 

The Sensex index increased 73.58 points to 71,891.62, and the Nifty index rose 32.35 points to 21,866.65.

On the Mumbai stock exchange, 124 stocks traded at their 52-week highs and 13 stocks traded at their 52-week lows.

 

India's Current Account Deficit to Moderate

India's current account deficit moderated after the service sector surplus rose at a healthy pace, the Reserve Bank of India reported on Wednesday. 

The service trade surplus in the fiscal third quarter ending in December rose 16% to $44.9 billion, helping the current account to shrink further. 

Service exports in the quarter rose 5.2% to $87.7 billion, and imports advanced 4.2% to $42.8 billion from a year ago, respectively. 

India's current account deficit in the fiscal first half ending in September moderated to 1.0% from 2.9% after the merchandise trade deficit shrank and the service sector surplus rose. 

The steady growth in service sector surpluses and foreign remittances has helped the country lower its current account deficit over the last decade.