Chinese stocks saw gains as an official hinted at potential spending plans, while other Asian markets experienced declines following disappointing US earnings reports and the Federal Reserve’s stance on interest-rate cuts. The CSI 300 in China rebounded after a four-day slump, while Hong Kong’s Hang Seng Index advanced following a two-day decline. The Caixin manufacturing PMI gauge met expectations, signaling expansion, and a Beijing official indicated that the government would establish a “reasonable” investment size.
Li Xianzhong, head of the Treasury Department at the Ministry of Finance, stated during a briefing in Beijing that fiscal expenditure in 2024 would maintain necessary intensity, citing a foundation for increased fiscal income this year.
On the other hand, shares in Australia and Japan declined following a 1.6% drop in the S&P 500, the largest since September. Aozora Bank Ltd. tumbled 21% in Tokyo after announcing losses linked to US commercial property, mirroring difficulties faced by New York Community Bancorp.
US equity contracts edged higher, with Nasdaq 100 futures showing strength, despite major losses among Big Tech companies like Microsoft Corp. and Alphabet Inc. on Wall Street. European contracts, however, experienced declines.
Following the Fed’s decision, Chair Jerome Powell indicated that a rate cut in March is unlikely, signaling a cautious approach. The central bank emphasized the need for greater confidence in inflation moving sustainably toward 2% before considering rate reductions.
Treasury gains held steady in Asian trading, with the 10-year note’s yield falling 12 basis points in the previous session. Concerns over regional lenders persisted alongside Powell’s comments. The Bloomberg Dollar Spot Index edged lower, while the yen led gains among G-10 peers.
Raf Choudhury, Investment Director of Multi-Asset at abrdn, highlighted potential short-term market volatility due to disparities in expectations versus the Fed’s stance.
Greg Peters at PGIM Fixed Income cautioned against dismissing inflation concerns too hastily, anticipating continued market volatility and potentially challenging conditions for bondholders.
Despite Wednesday’s market losses, the S&P 500 and global stocks recorded a third consecutive monthly advance in January, aligning with the “January Barometer” theory.
In commodities, oil remained largely unchanged amid tensions in the Middle East, marking its first monthly gain since September. Gold extended its four-day advance.
Key events for the week include Eurozone S&P Global Manufacturing PMI, US productivity, construction spending, ISM Manufacturing, initial jobless claims, and earnings reports from Apple, Amazon, Meta, Deutsche Bank, and BNP Paribas.
Stocks:
- S&P 500 futures: +0.3%
- Nikkei 225 futures (OSE): -1.2%
- Japan’s Topix: -0.8%
- Australia’s S&P/ASX 200: -1.2%
- Hong Kong’s Hang Seng: +1.4%
- Shanghai Composite: +0.2%
Currencies:
- Bloomberg Dollar Spot Index: -0.1%
- Euro: $1.0812
- Japanese yen: 146.67 per dollar
- Offshore yuan: 7.1859 per dollar
Cryptocurrencies:
- Bitcoin: $41,967.18 (-1.2%)
- Ether: $2,256.58 (-0.9%)
Bonds:
- 10-year Treasuries yield: +2 basis points to 3.94%
- Japan’s 10-year yield: -2.5 basis points to 0.705%
- Australia’s 10-year yield: -2 basis points to 3.99%
Commodities:
- West Texas Intermediate crude: $76.28 per barrel (+0.6%)
- Spot gold: $2,046.50 per ounce (+0.3%)
