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News that growth in China has continued to hold up brought relief to Asian markets, but stocks failed to rally as hopes for more aggressive stimulus by Chinese policymakers to bolster the world's second largest economy faded.
China's economy grew 7.6 percent in the April-June quarter from a year earlier, the National Bureau of Statistics said, the slowest pace since the January-March quarter of 2009. In the first quarter of the year, China's economy grew 8.1 per cent from a year earlier.
The Shanghai Composite , which edged higher following the release of the data, slipped back into negative territory by midday. Japan's Nikkei 225 and Australia's ASX-200, which rose further following the data, also pared back the gains in the afternoon session.
“The initial bounce in stocks was a reflection of relief among investors that growth in China is continuing to hold up,” Darius Kowalczyk, Senior Economist & Strategist at Credit Agricole told CNBC.
However, equity market gains were capped by a fall in expectations for aggressive stimulus by Chinese policymakers, Kowalczyk said.
“Growth data suggests the bottom is behind us. This means there is less need for desperate to stimulus for policy measures,” said Kowalczyk, who forecast growth of 7.5 percent in the second quarter.
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