Asian markets mixed as Japan’s GDP growth misses forecasts

Japan's Nikkei 225 climbed in early Monday trading even as government data showed the economy grew at a slower-than-expected pace in the second quarter, while the yen edged higher against the dollar as traders recalibrated expectations for US monetary policy.

Mixed Signals From Tokyo

Japan's economy expanded at an annualised 1.1% in the April-to-June quarter, well below the 2% growth economists had forecast and slower than the previous quarter's pace. The miss was driven by a 1.2% quarterly decline in capital expenditure and flat private consumption, as elevated energy costs weighed on household spending. External demand was a bright spot, contributing 0.5 percentage points to growth as a historically weak yen continued to support exporters.ndtvprofit+1

Despite the soft reading, the Nikkei rose 0.38% in early trade, while Australia's ASX 200 fell 0.37%. South Korea's Kospi surged 2.42% after reopening from a holiday. In China, the Hang Seng gained 1.4% and Shanghai's composite rose 0.36%.kaohooninternational+1

Fed Repricing Drives Yen Higher

The yen strengthened 0.2% to 159.055 per dollar, with currency markets focused less on the GDP miss and more on shifting US rate expectations. Fed funds futures now imply a 66.9% chance the Federal Reserve holds rates at its September meeting, up from 47.6% a month earlier, according to the CME Group's FedWatch tool.investinglive+1

Analysts at Capital Economics described the GDP details as mixed, noting that the GDP deflator held at 2.6% year-on-year — well above the Bank of Japan's 2% target — leaving the case for a BOJ rate hike in September largely intact. The policy divergence between a cautious Fed and a still-hawkish BOJ continues to underpin the yen.investinglive

Geopolitics and Oil in Focus

Oil prices remained elevated, with Brent crude trading near $89 a barrel after gaining more than 5% last week amid attacks on tankers in the Strait of Hormuz and stalled US-Iran negotiations. Investors will look to Wednesday's release of Federal Reserve meeting minutes for further guidance on the US rate path.thevibes+1