Asian equities experienced losses, and U.S. stock futures declined as China’s industrial profit growth slowed down, dampening optimism following last week’s market rally. The yen gained strength against all Group-of-10 currencies. Chinese shares, particularly in the Hang Seng China Enterprises Index and CSI 300 Index, led the decline after data revealed that profits at the nation’s industrial firms increased at a slower pace, indicating lingering uncertainty in the economic recovery. Benchmarks in Australia and Japan also saw decreases.
The previous week’s gains in equities were trimmed amid uncertainty leading up to crucial global economic data releases, including euro-zone inflation figures, China’s PMIs, and U.S. personal consumption numbers on Thursday. Additionally, on Friday, attention will turn to PMIs from the U.S., Europe, and China. Asian markets lacked a clear direction from the U.S. due to the holiday-shortened post-Thanksgiving session on Friday.
Matt Simpson, a senior market strategist at City Index Inc., noted, “We’ve seen U.S. bond yields gap higher at the open, and that has weighed on equity market sentiment to send U.S. futures down alongside Chinese markets that are already under pressure from weak industrial profits.”
U.S. stock futures dropped in Asia after the S&P 500 concluded a fourth consecutive week of gains. The VIX, Wall Street’s “fear gauge,” reached its lowest level since January 2020. The sluggish growth in Chinese industrial companies’ profits may make businesses more cautious about expansion and hiring, potentially increasing pressure on prices. October’s profits showed only a 2.7% increase from a year ago, significantly down from September’s 11.9% gain.
Investors will closely monitor Chinese activity data to assess the health of the world’s second-largest economy. Traders will also evaluate shadow banking stocks following criminal investigations into Zhongzhi Enterprise Group Co.’s money management business.
In Hong Kong, the one-month interbank offered rate rose to the highest level since 2007 due to tightening cash supply towards year-end.
Treasury 10-year yields climbed, reaching 4.51%, the highest in over a week. The dollar showed mixed performance in Asian trade, and analysts predict it may “remain heavy” throughout the week, with expectations for a soft landing in the U.S. economy supporting portfolio capital flows into emerging markets.
Key events this week include data releases, central bank decisions, and geopolitical updates, influencing various asset classes. Traders will also be focused on corporate earnings reports, especially in the technology and cybersecurity sectors.
