Stocks in Asia Rise Amid Fragile China Recovery: Markets Wrap

(Bloomberg) — Asian shares traded broadly higher amid lingering concerns over China’s economy. US markets are shut for the Presidents’ Day holiday.

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A gauge of Asia Pacific shares ticked upwards and was set to climb for a third session. China mainland benchmark CSI 300 Index rebounded from earlier losses in the first day of trading after the Lunar New Year break, while Chinese shares in Hong Kong remained on the back foot. The stocks had struggled in the early hours despite buoyant travel and tourism data that suggested consumption revved up even as the broader economy struggles with deflation and a property crisis.

Traders are now looking for further policy support across China’s 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 it’s 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 with data set to come out on Tuesday.

Elsewhere, Japan’s Tokyo Stock Price Index rose, with bank shares leading the gains. The Nikkei-225 Stock Average was little changed with the index remaining near its record close in 1989. Contracts for Europe equities fell, but those for the US climbed marginally higher after the S&P 500 Index dropped 0.5% on Friday on signs that inflation in the US is “stickier” than expected.

There was no cash trading of Treasuries in Asia due to the US holiday. 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 around 150 per dollar with the greenback weakening against most 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.

In commodities, 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. Concerns over China’s economy also led iron ore to tumble after five days of gains.

US Stocks Rally

US and global stocks are yet to respond to the sell-off in Treasuries this month. This comes after a string of better-than-expected economic data drove traders to roll back their once-aggressive rate-cut which 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.

For JPMorgan Asset Management, US stocks are priced for perfection amid “healthier” market momentum since the beginning of the year.

“Markets have adjusted to the idea that rate cuts would come later and probably be less important than what was originally priced,” Vincent Juvyns, global market strategist, said on Bloomberg Television. The move upward are also “really driven by decent earnings growth that we have seen during the fourth quarter,” he added.

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 rose 0.1% as of 6:50 a.m. London time. The S&P 500 fell 0.5% on Friday
Nasdaq 100 futures rose 0.2%. The Nasdaq 100 fell 0.9%
Euro Stoxx 50 futures fell 0.3%
Japan’s Topix index rose 0.6%
Hong Kong’s Hang Seng Index fell 0.8%
China’s Shanghai Composite Index rose 1.4%
Australia’s S&P/ASX Index 200 was little changed