SYDNEY (Reuters) – Asian equities faltered on Monday as anxious investors waited to see if US earnings could justify sky-high valuations, while a rise in bonds could be tested on the very good readings for US inflation and retail sales this week.
MSCI’s broadest index of Asia-Pacific stocks outside Japan declined 1.1% in slow-moving trading. The Nikkei in Tokyo fell 0.6%, while South Korean shares were almost flat.
The Nifty 50 index declined by 2.4% as India overtook Brazil to become the country with the second most COVID-19 cases.
Chinese blue chips lost 1.5% before a storm of economic figures out of the country.
Shares in Alibaba Group Holding Ltd rose 16% after China imposed a record fine of 18 billion yuan ($ 2.75 billion) on the e-commerce giant. US investors own more than a third of the shares and make up more than 8% of the MSCI EM index.
“Ever since the Ant-IPO was canceled and with the antitrust laws in the offing, the market has expected Alibaba to pay a price,” said Louis Tse, managing director of Wealthy Securities in Hong Kong.
“I think it’s good for the share price now that the news has been delivered and it’s finally cleared up. ‘
Nasdaq futures slipped 0.3% on Monday, as did S&P 500 futures. EUROSTOXX 50 futures declined on both sides of the flat, while FTSE futures fell 0.3%.
Growth and technology stocks saw something of a revival last week as US Treasury yields fell from ten years to 1.66%, from a 14.7-month high of 1.776%.
However, Thomas Mathews, a market economist at Capital Economics, doubts whether the bond effect would last.
“Given the pace of economic recovery and the Fed’s apparent unwillingness to stand in the way of higher yields, we think long-term yields will rise again soon,” he said.
Over the weekend, Jerome Powell, chairman of the Federal Reserve, said the economy was on the verge of growing much faster, although the coronavirus remains a threat.
Data from this week are expected to show that US inflation jumped in March, while retail sales can be seen even with a double-digit profit. The Treasury will also test demand with offers of $ 100 billion in debt this week.
“Rapid economic growth, supported by reopening and accommodating fiscal policies, could excessively benefit the stock market sector, which is more sensitive to the health of the economy,” Mathews told Capital.
“And the composition of growth is likely to be more skewed towards these sectors than during a typical economic expansion.”
It will probably also show profit. The banks begin the first quarter’s earnings season this week with Goldman Sachs, JPMorgan and Wells Fargo reporting on Wednesday.
Analysts expect profits for S&P 500 companies to show a 25% jump from a year earlier, according to the Refinitiv IBES data. This would be the strongest performance for the quarter since 2018.
The yield in returns was enough to see the dollar come down from the boiling point last week. It was last at 92,265 against a basket of currencies, up from a high of 93,439.
It was level on the yen at 109.60, and short of its March high of 110.96. The euro held at $ 1.1889 and above its recent trough of $ 1.1702.
Gold prices were at $ 1,737 per ounce, up from a peak of $ 1,758 last week. [GOL/]
Oil prices fell by about 2% last week as production increased and the renewed COVID-19 closure in some countries offset the optimism about a recovery in fuel demand. [O/R]
Brent was priced at 3 cents on Monday at $ 62.98 a barrel, while US crude was flat at $ 59.32.
Edited by Shri Navaratnam and Ana Nicolaci da Costa