Japan Stocks Rebound, As Hong Kong Wavers

Japanese stocks rebounded Tuesday to take back some of the steep losses they suffered the previous day as banks and several beaten-down shares rallied in the wake of overnight gains on Wall Street.

Other Asian markets ended mixed, after enduring wide swings between gains and losses as strong cues from U.S. stocks were countered by concerns over China’s growth trajectory.

In Japan, the benchmark Nikkei Stock Average JP:NIK +2.05% rose 2.1% a day after it plunged 3.7%. The U.S. dollar USDJPY +0.68% climbed back above the psychologically-important level at the end of the day’s stocks trading, just a day after dropping under that level, and was fetching ¥100.16. The broader Topix JP:I0000 +2.60%  ended 2.6% higher.

Japanese bond, stock and currency markets have seen extreme volatility of late amid an increase in the yields on domestic government debt and worries the Fed may pare its asset purchases. Tuesday’s rebound pares the steep losses suffered in Tokyo since May 23, when the Nikkei plunged 7.3%, after posting hefty gains in a rally that started late last year.

“Between the volatility in the yen and the Japanese equity and bond markets, the Bank of Japan, [which] meets next week, may realistically consider increasing the frequency of asset purchases just to renew the rallies,” BK Asset Management managing director Kathy Lien wrote in a note to clients.

Banks rallied after the higher U.S. finish, with Mitsubishi UFJ Financial Group Inc.JP:8306 +7.46%   MTU -4.38% soared 7.5%, and Sumitomo Mitsui Financial Group Inc.JP:8316 +8.98% SMFG -2.73% spiked 9%.

Stocks in several other sectors rallied as well to take back some recent losses, with Japan Tobacco Inc. JP:2914 +3.44%   JAPAF -3.18% rising 3.4%, real estate developer Mitsui Fudosan Co. JP:8801 +6.38% MTSFF -20.88%  climbing 6.4%, mobile service provider Softbank Corp. JP:9984 +4.07%   SFTBF -4.17%  adding 4.1% and steel maker Nippon Steel & Sumitomo Metal Corp. JP:5401 +4.76%   NISTF -5.19% climbing 4.8%.

Shares of Tokyo Electric Power Co.JP:9501 +2.51% TKECY -5.60% added 2.5% as a report in the Nikkei newspaper said the power utility and 10 other local firms were considering importing coal together in a move that could slash their transport costs.

Among other companies named as part of the plan, Nippon Paper Industries Co.JP:3863 +3.40% rose 3.4%, but Tohoku Electric Power Co. JP:9506 +0.75%TEPCY 0.00%  gained 0.8%.

Rest of the region

Elsewhere, the Shanghai CompositeCN:000001 -1.17%  gave up 1.2%, and Hong Kong’s Hang Seng Index HK:HSI +0.01%  ended flat, as analysts considered the outlook after the May surveys on Chinese manufacturing by the government and HSBC offered a contrasting view on factory-level activity.

Barclays economist Jian Chang said the divergence in the two monthly Purchasing Managers’ Indexes made it difficult to gauge the strength and direction of the Chinese economy in the near term.

“It is probably fair to say that growth momentum remains soft amid domestic overcapacity, external weakness, uncertain domestic policy and a lack of new stimulus,” Chang said.

South Korea’s Kospi KR:SEU -0.0030%  also ended flat, while Australia’s S&P/ASX 200AU:XJO +0.26%  added 0.3% after the Reserve Bank of Australia left its policy interest rates unchanged but left the door open to further cuts in future.

Most regional stock benchmarks changed direction at least once after stocks on Wall Street advanced overnight, as weak U.S. manufacturing data reinforced some expectations that the Federal Reserve will maintain its bond purchases — a key tailwind for global equities over the past several quarters.

In Sydney, some financial sector stocks ended with modest gains after the RBA decision. Commonwealth Bank of Australia AU:CBA +0.34% CBAUF -2.75% climbed 0.3% and Australia & New Zealand Banking Group Ltd. AU:ANZ +0.22%   ANZBY +4.05%  rose 0.2%.

In Hong Kong and Shanghai, some Chinese property developers pulled back after recent gains, weighing on the broader market.

Shares of China Overseas Land & Investment Ltd. HK:688 -1.94% CAOVY +2.30%  fell 0.9% and China Resources Land Ltd. HK:1109 -0.42%   CRBJF -2.22%  dropped 0.4% in Hong Kong.

Gemdale Corp. CN:600383 -2.67%  lost 2.7% in Shanghai, and Oceanwide Real Estate Group Co. CN:000046 -0.50%  dropped 0.5% in Shenzhen.

MarketWatch