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Asia stocks swing as traders seek China stimulus: markets wrap

Asia stocks swing as traders seek China stimulus: markets wrap
Stock market information at the Nasdaq market site in New York, US, on Monday, 18 December 2023.

Asian stocks swung between gains and losses as investors monitored the latest economic development in China and ahead of the Federal Reserve’s preferred measure of inflation later this week.

Hong Kong and mainland China stocks fluctuated at the open. Concerns about China persisted after 11 Chinese companies lost their credit ratings on Friday at Moody’s Investors Service, which withdrew the scores in an unusual flurry that underscores fallout from record defaults. 

Investors are now waiting if the government will roll out more stimulus after President Xi Jinping on Friday called for a boost in the sales of traditional consumer products including cars and home appliances. Expectations of more stimulus were also fuelled by weak borrowing by local governments, stirring speculations that Beijing may pick up their slack and take on more debt.

South Korean stocks declined around 1% as the authority unveiled further details on its plans to push listed companies to improve management and corporate governance. Contracts for US shares also fell after the S&P 500 rally stalled at the end of last week, weighed by profit taking in mega cap tech stocks. 

Meanwhile, Federal Reserve Bank of New York president John Williams said in an interview published on Friday that the economy is headed in the right direction, and it will likely be appropriate to cut rates later this year.

“The week ahead may bring more trouble than calm – as March starts with a world concerned about sticky inflation, doubting the wisdom of waiting central bankers and fearing larger conflicts leading to further global trade disruptions,” Bob Savage, head of markets strategy and insights at BNY Mellon, wrote in a note to clients.

Treasuries extended gains in Asia, while Australia 10-year yields dropped nine basis points. The dollar strengthened against most of its G10 peers, with the New Zealand dollar leading losses. 

This week, investors will be bracing for the impact from heavy Treasury and corporate issuance and month-end positioning. There’s also a slate of economic data to be scrutinised, including the so-called core personal consumption expenditures price index on Thursday that’s the Federal Reserve’s favoured inflation gauge. 

Fed speakers are likely to reiterate William’s comments that the central bank doesn’t feel pressure to begin cutting rates anytime soon.

“Recent CPI inflation and employment information have clouded the timing and magnitude of rate cuts in the financial markets,” Stephen Gallagher, chief US economist at Societe Generale SA wrote in a note to clients. “Affirming that rate cuts are likely sustains hopes for cuts in the coming months, albeit not in March.” 

Oil held the biggest drop in three weeks after breaching a key moving average, with prices still trapped in a tight trading range. Gold slid.

Elsewhere, Zambia said it reached a deal on debt restructuring with China and India as emerging market investors pile into African debt in a hunt for yield. Meantime, the US and China are discussing new measures to prevent a wave of emerging market defaults, including ways to preemptively extend loan periods before countries miss payments.

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