The first trading day of the year witnessed a shadow cast over global markets as Chinese shares weighed down Asian equities. Weaker-than-expected factory data and a cautious economic outlook from President Xi Jinping contributed to the decline. Hong Kong’s benchmark share gauge slid by as much as 1.7%, leading to the broader regional equity benchmark facing its first decline in seven days.
Chinese factory activity, as revealed by data published on Sunday, contracted in December to its lowest level in six months. President Xi Jinping, in his televised annual new year address on Sunday, acknowledged economic challenges, promising to enhance economic momentum and job creation. However, concerns persist, with Mark Matthews, Head of Asia Research at Julius Baer, suggesting that China may encounter another challenging year in 2024. President Xi’s economic priorities include reducing the size and significance of the property sector, a process deemed painful.
Crude oil prices rose following Iran’s deployment of a warship to the Red Sea in response to the destruction of Houthi boats by the US Navy. This move heightened tensions, potentially complicating global trade routes. Additionally, ASML Holding NV reportedly canceled shipments of semiconductor manufacturing equipment to China at the request of the US President Joe Biden’s administration.
US stock futures remained stable, with the yen weakening against most of its Group-of-10 peers. In the cryptocurrency space, Bitcoin surpassed $45,000 for the first time in nearly two years amid anticipation of the approval of an ETF directly investing in the digital asset.
Concerns about market exhaustion surfaced, reflecting an over $8 trillion surge in the S&P 500 in the previous year. Traders, who initially anticipated uncertainty from the Federal Reserve, recession fears, and geopolitical risks in 2023, found themselves chasing a robust market rally.
Despite China’s economic challenges, some investors view the nearly 60% slump in Chinese stocks as a buying opportunity. In a Markets Live Pulse survey, almost a third of respondents expressed intentions to increase their China investments over the next 12 months, surpassing the figures from previous surveys.
Key Events This Week:
- Eurozone S&P Global Eurozone Manufacturing PMI on Tuesday
- UK S&P Global UK Manufacturing PMI on Tuesday
- Germany unemployment data on Wednesday
- US FOMC minutes, ISM Manufacturing, job openings, and light vehicle sales on Wednesday
- China Caixin services PMI on Thursday
- Eurozone S&P Global Eurozone Services PMI on Thursday
- US initial jobless claims, ADP employment on Thursday
- Eurozone CPI, PPI on Friday
- US nonfarm payrolls/unemployment, factory orders, ISM services index on Friday
Main Market Moves:
- S&P 500 futures and Nasdaq 100 futures were little changed.
- Hong Kong’s Hang Seng Index fell 1.4%.
- China’s Shanghai Composite Index fell 0.1%.
- Australia’s S&P/ASX 200 Index rose 0.5%.
Currency and Cryptocurrency Movements:
- The Bloomberg Dollar Spot Index rose 0.1%.
- Bitcoin rose 4% to $45,353.99.
- Ether rose 2.2% to $2,390.83.
Bonds and Commodities:
- Australia’s 10-year yield advanced five basis points to 4.01%.
- West Texas Intermediate crude rose 1.7% to $72.85 a barrel.
- Spot gold rose 0.4% to $2,071.68 an ounce.
