Business Maverick

Business Maverick

Asia shares pare gains as China data disappoints: markets wrap

Asia shares pare gains as China data disappoints: markets wrap
JPMorgan Chase & Co headquarters in New York, US, on Wednesday, 18 January 2023. (Photo: Gabby Jones/Bloomberg)

Asian equities trimmed gains after China reported worse-than-estimated data that added to concern the world’s second-largest economy is losing momentum. The offshore yuan weakened.

Mainland stocks swung to losses and those in Hong Kong pared their advance after the reports showed consumer spending and industrial activity both grew at a slower pace in April than expected. The data weighed on sentiment that was previously propped up by a 4% gain in the Nasdaq Golden Dragon China Index on Monday, when filings showed money manager Michael Burry boosted his bullish bets on e-commerce giants JD.com Inc. and Alibaba Group Holding Ltd. 

“This set of data confirms what the credit data/imports/inflation numbers suggest all along — that domestic demand is weak, further monetary policy easing is required at some point and that yuan could remain under pressure,” said Fiona Lim, senior FX strategist at Malayan Banking Bhd. in Singapore

The broader MSCI Asian equity gauge still posted gains, with Japan’s Topix index headed for the highest close since 1990. Solid fundamentals and expectations for structural changes “justify a bullish stance” on Japan’s equities, Goldman Sachs said. 

The dovish bias by the Bank of Japan is also positive for Japanese equities and “earnings have been increasing relative to other jurisdictions”, said Chris Weston, head of research at Pepperstone Group Ltd. “There’s a lot working for it at the moment from a technical and fundamental perspective,” he said on Bloomberg Television. “We still like the case that’s going on in Japan right now.”

South Korean equities also rallied, supported by chip stocks on the potential merger between Kioxia Holdings Corp. and Western Digital Corp. Australian stocks declined.

US equity futures edged lower before a meeting between President Joe Biden and House Speaker Kevin McCarthy on Tuesday. The US stock market gained on Monday amid mixed signals sent by both factions in the debt-ceiling talks. Treasury Secretary Janet Yellen reiterated her department may run out of cash as soon as June 1 unless Congress raises or suspends the federal debt limit.

The dollar and Treasuries both edged higher, while the Aussie weakened after the China data. Reserve Bank of Australia minutes showed officials weighed the risk of upside surprises to inflation amid a tight labor market in their surprise decision to hike rates this month.

More volatility

UBS Private Wealth Management expects to see more volatility in the markets, especially on the short-end of the Treasury curve, as the deadline approaches on the debt-ceiling dispute. “If you’re someone who has cash on the sideline, right now we are recommending that you go ahead and you lock in those improved bond yields,” financial adviser Sarah Ponczek said on Bloomberg Television.

Meanwhile, data showed New York manufacturing slid the most since April 2020. This week’s figures will likely underscore more economic weakness, emboldening the Federal Reserve’s dovish voices even though inflation has failed to reassure, according to Anna Wong at Bloomberg Economics.

JPMorgan Chase & Co.’s Marko Kolanovic joined a chorus of Wall Street strategists Monday in warning that the US debt-ceiling impasse is yet another headwind threatening the outlook for equity markets. Morgan Stanley’s Mike Wilson delivered a similar warning on the debt-ceiling deadline, noting the bank’s clients said the issue is unlikely to be resolved without some near-term volatility. 

Elsewhere, oil climbed and gold was little changed. BM/DM

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