Asia Stocks Erase Gains as China Optimism Fades: Markets Wrap

(Bloomberg) — Asian shares fell as earlier optimism that was triggered by positive Chinese holiday data dissipated.

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A gauge of Asia Pacific shares slipped after rising 0.4% in the early trading as mainland Chinese stocks pared their advances, with the CSI 300 Index dragged down by declines in financials and health care. Chinese shares in Hong Kong also fell. 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.

“While the overall trend remains upward, the volatility at open suggests traders need time to digest a flurry of news from the holiday and the trend may become clearer later in the day,” said Shen Meng, director at Chanson & Co in Beijing.

A sub gauge measuring Chinese consumer stocks, however, maintained its gains 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.

Japan’s Tokyo Stock Price Index was mostly flat, 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. Australian stocks rose, while contracts for US equities also climbed 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.

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The yen strengthened around 150 per dollar with the greenback weakening against all 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 fell, but remained near the highest level this year as persistent tensions in the Middle East added a risk premium to the market. Gold held a two-day gain.

Elsewhere, 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 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 10:49 a.m. Tokyo time. The S&P 500 fell 0.5% on Friday

• Nasdaq 100 futures rose 0.2%. The Nasdaq 100 fell 0.9%

• Japan’s Topix index was little changed

• Hong Kong’s Hang Seng Index fell 0.8%

• China’s Shanghai Composite Index rose 0.7%

• Australia’s S&P/ASX Index 200 rose 0.1%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0782

• The Japanese yen rose 0.2% to 149.94 per dollar

• The offshore yuan was little changed at 7.2099 per dollar

• The Australian dollar rose 0.2% to $0.6542

Cryptocurrencies

• Bitcoin rose 0.3% to $52,031.31

• Ether rose 0.6% to $2,865.73

Bonds

Commodities

• West Texas Intermediate crude fell 0.4% to $78.85 a barrel

• Spot gold rose 0.3% to $2,019.40 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Matthew Burgess and Zhu Lin.

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