Japan’s shares rose, ending a two-day losing streak, while equities fell in South Korea and Australia. Contracts for the S&P 500 fell, with US markets shut Monday. A gauge of global equities traded flat in a sign the rally that’s pushed it to the best start to a year since 1988 has stalled. 

Stocks trading in Hong Kong and mainland China remained in the red after China’s economy last year grew at the second slowest pace since the 1970s as Covid restrictions hammered activity. But better-than-forecast fourth quarter and December data add to optimism it may be primed for a recovery.

Among those bullish on the recovery are Goldman Sachs Group and UBS Group AG as the resumption of activity in China promises to unleash over $836-billion of excess savings, and may help ease fears of a global downturn as other central banks continue to tighten policy. A plan by Chinese financial regulators and the nation’s biggest bad-debt management companies to offer support to high-quality developers may shore up positive sentiment as well.

The yen fell 0.2% against the dollar, as traders weighed the prospects of a possible change in policy by the Bank of Japan on Wednesday. The nation’s 10-year yield climbed above the central bank’s ceiling for a third day as traders added to wagers that it will adjust its yield-curve control policy. The dollar was little changed while Treasury yields climbed across the tenors.  

“A reversal of a policy correction trade is likely to occur ahead of the results of the BOJ decision meeting announcement tomorrow,” said Hideyuki Ishiguro, senior strategist at Nomura Asset Management. “There was yen-buying and a selling of the Nikkei against the backdrop of policy revisions, but this morning the yen’s appreciation will take a breather, and there could be a yen selling and a buying of Nikkei futures.”

Activist investor Ryan Cohen took a stake in Alibaba Group Holding and is advocating that the Chinese e-commerce company increase repurchases of its own shares. Some analysts say the move may lift foreign interest in the stock. 

Several Federal Reserve officials will be speaking this week, providing more clues on their policy priorities. The World Economic Forum’s annual meeting kicks off in Davos, Switzerland, with speakers including European Central Bank president Christine Lagarde and the International Monetary Fund’s Kristalina Georgieva.

Raise rates

BlackRock expects central banks to keep raising rates this year to ensure inflation sticks to its downward path. That will defy traders who expect policy makers to ease off, according to vice chairman Philipp Hildebrand. 

Earnings reports from Goldman Sachs and Morgan Stanley due on Tuesday will provide guidance about the health of the global economy. Financial companies dominate the docket of fourth-quarter results this week and include Charles Schwab Corp, PNC Financial Services Group and State Street Corp.

“We are in the early stage of an earnings recession,” William Curtayne, portfolio manager at Milford Asset Management, said on Bloomberg Television. “The S&P 500 earnings are down about 5% from their peak and we see that earnings downturn going more than 20% and we think that’ll play out over the next six to nine months.”

Bitcoin dipped, but held above $21,000 in a sign of healthy risk appetite. Elsewhere, oil declined as investors waited for a market outlook from the Organization of Petroleum Exporting Countries that may yield clues about supply and demand in 2023. Gold steadied. BM/DM