Stocks in Asia Flat as China Optimism Fades Away: Markets Wrap
(Bloomberg) — Asian shares traded unchanged as positive Chinese holiday data failed to support earlier optimism.
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A gauge of Asia Pacific shares was mostly flat amid fluctuations in mainland Chinese stocks. The CSI 300 Index swung to losses — dragged down by declines in financials and health care — before returning to gains while Chinese shares in Hong Kong remained on the back foot. Buoyant travel and tourism data during the Lunar New Year break earlier suggested consumption revved up even as the broader economy struggles with deflation and a property crisis.
A sub gauge measuring Chinese consumer stocks edged lower as traders looked for further policy support across the monetary and fiscal space, in addition to a cut in the reserve requirement ratio already undertaken. Chinese Premier Li Qiang on Sunday called for “pragmatic and forceful” action to boost the nation’s confidence in the economy.
“For the Hang Seng China Enterprises Index, I think its normal to see a pull back after three consecutive sessions of gains, and there is some profit taking in Hong Kong market today,” said Dickie Wong, executive director of research at Kingston Securities Ltd. “The next thing to watch is a potential lowering of the five-year loan prime rate,” Wong added, referring to China’s reference rate for mortgages.
Concerns over China’s economy also led iron ore to tumble after five days of gains.
Elsewhere, Japan’s Tokyo Stock Price Index rose, while the Nikkei-225 Stock Average slipped with shares in gaming company Nintendo Co. falling as much as 8.8% after it said it was pushing back the launch of its Switch successor to the beginning of next year. Still, the Nikkei hovered near its record close in 1989. Contracts for US equities climbed marginally higher after the S&P 500 dropped 0.5% on Friday.
There was no cash trading of Treasuries on holiday in the US. They fell on Friday, with two-year yields up seven basis points to 4.65% after the producer price index rose on a sizable jump in costs of services.
The yen strengthened to just below 150 per dollar with the greenback weakening against some of its Group-of-10 peers. The yuan was little changed after the People’s Bank of China on Sunday held the interest rate on its one-year policy loans at 2.5% while injecting a small amount of cash into the financial system.
Oil slid from the highest level in three weeks as lingering concerns over the demand outlook offset ongoing Middle East tensions. Gold held a two-day gain.
US and global stocks are yet to respond to the sell-off in Treasuries this month as a string of better-than-expected economic data drove traders to roll back their once-aggressive rate-cut bets so much that their expectations are now approaching the Fed’s own 75 basis-point forecast this year. Swaps are pricing about 90 basis points of rate cuts in 2024 — from more than 150 basis points at the start of February.
Goldman Sachs Group Inc. expects the rally in the US to continue, with the S&P 500 reaching 5,200 by year-end as the resilient US economy drives company profit growth, strategists led by David Kostin wrote in a note to clients. The new target implies a 3.9% jump from Friday’s close.
UBS Group AG’s wealth management unit also has a positive view on equities once the Federal Reserve starts cutting rates, particularly in small-cap stocks as consumer spending should stay healthy given the strength of the labor market.
“Fed rate cuts are likely still not far off, despite mixed comments from top officials,” said Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management. “While we do not expect the path toward lower inflation and lower rates to be smooth, we maintain the view that a soft landing for the US economy favors quality bonds and equities.”
This week, traders will be keeping an eye on European inflation data as well as earnings from Nvidia Corp. and mining giants BHP Group Ltd and Rio Tinto Plc to help gauge the health of the global economy. Meantime, conflict in the Middle East is set to drag on as negotiations aimed at securing an Israel-Hamas cease-fire and the release of hostages haven’t progressed as hoped, Qatar’s foreign minister said.
Some of the key events this week:
Reserve Bank of Australia Feb. meeting minutes, Tuesday
China loan prime rates, Tuesday
BHP Group Ltd earnings, Tuesday
European Central Bank publishes euro-area indicator of negotiated wage rates, Tuesday
Rio Tinto Plc earnings, Wednesday
Eurozone consumer confidence, Wednesday
Nvidia Corp earnings, Wednesday
Federal Reserve Jan. meeting minutes, Wednesday
Atlanta Fed President Raphael Bostic speaks, Wednesday
Eurozone CPI, PMI, Thursday
European Central Bank issues account of Jan. 25 meeting, Thursday
Fed Governor Lisa Cook, Minneapolis Fed President Neel Kashkar speak, Thursday
China property prices, Friday
European Central Bank executive board member Isabel Schnabel speaks, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 1:10 p.m. Tokyo time. The S&P 500 fell 0.5% on Friday
Nasdaq 100 futures rose 0.1%. The Nasdaq 100 fell 0.9%
Japan’s Topix index rose 0.3%
Hong Kong’s Hang Seng Index fell 1%
China’s Shanghai Composite Index rose 0.9%
Australia’s S&P/ASX Index 200 was little changed
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0775
The Japanese yen rose 0.2% to 149.94 per dollar
The offshore yuan was little changed at 7.2078 per dollar
The Australian dollar rose 0.1% to $0.6538
Cryptocurrencies
Bitcoin rose 0.3% to $52,039
Ether rose 1.3% to $2,885.32
Bonds
Commodities
West Texas Intermediate crude fell 0.5% to $78.78 a barrel
Spot gold rose 0.3% to $2,019.72 an ounce
This story was produced with the assistance of Bloomberg Automation.
Coming soon: Sign up for Hong Kong Edition to get an insider’s guide to the money and people shaking up the Asian finance hub.
–With assistance from Matthew Burgess and Charlotte Yang.
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