SYDNEY (Reuters) – Asian equities compared early losses on Monday as data confirmed that the Chinese economy slumped last quarter when production jumped, which could partially offset recent disappointing news about U.S. consumer spending.
Chinese blue chips rose 0.8% after the economy grew by 6.5% in the fourth quarter, a year earlier and forecast above 6.1%.
Industrial production for December is also beating estimates, although retail sales are missing the point.
“Despite the recent decline in retail sales, we are seeing consumption rise sharply as households reduce the excess savings they accumulated last year,” said Julian Evans-Pritchard, China’s senior economist at Capital Economics.
“Meanwhile, the backwind of last year’s stimulus should keep the industry and construction strong for a while longer.”
MSCI’s broadest index of Asia-Pacific stocks outside Japan rounded off losses and was 0.3% lower. Japan’s Nikkei slipped 0.8% to a 30-year high.
E-Mini futures for the S&P 500 fell 0.2%, although Wall Street will be closed for a holiday on Monday. EUROSTOXX 50 futures facilitated 0.2% and FTSE futures 0.1%.
The increase in China was a clear contrast to the US and Europe, where the spread of coronavirus caused consumer spending to decline, underlined by the gloomy US sales reported on Friday.
There is also clear doubt as to how much of US President-elect Joe Biden’s stimulus package will give Congress, given Republican opposition, and the risk of more mob violence during his inauguration Wednesday.
“The data calls into question the sustainability of the recent increase in bond yields and the rise in inflation compensation,” ANZ analysts said in a statement.
“There is a lot of good news around vaccines and stimuli being priced in equities, but optimism is being challenged by the reality of the difficult few months ahead,” they warned. “The risk in Europe is that locks will be expanded and that business in the US could rise sharply as the UK COVID variant spreads.”
This week, it will focus on earnings-driven corporate results, which include BofA, Morgan Stanley, Goldman Sachs and Netflix.
The weak US data helped compare to Treasury’s recent strong losses, with ten-year returns trading at 1,087%, up from 1,187%.
The more sober state of mind has in turn boosted the safe haven US dollar and a bearish market very short. Speculators increased their net short dollar position to the largest since May 2011 in the week ended January 12th.
The dollar index has strengthened considerably to 90,816, and away from the recent 2-1 / 2-year trough at 89,206.
The euro retreated to $ 1.2074, from its peak in January at $ 1.2349, while the dollar on the yen remained stable at 103.78 and well above the recent low of 102.57.
The Canadian dollar declined to $ 1.2773 per dollar after Reuters reported Biden planned to revoke the permit for the Keystone XL oil pipeline.
Biden’s choice for Treasury Secretary Janet Yellen is expected to rule out a weaker dollar when he testifies at Capital Hill on Tuesday, the Wall Street Journal reported.
Gold prices were undermined by the refusal of the dollar leaving the metal at $ 1,828 per ounce, compared to the January peak of $ 1,959.
Oil prices have become profitable over concerns that the proliferation of increasingly restricted connections would hurt global demand. [O/R]
Brent crude futures fell 52 cents to $ 54.58 a barrel, while US crude fell 44 cents to $ 51.92.
Edited by Shri Navaratnam and Gerry Doyle