Asian stocks struggled on the opening day of the week as nervousness over the banking sector lingered, geopolitical tensions remained and poor data out of China dampened hopes of a recovery.
That anxiety fed through the region’s markets on Monday although Japan bucked the trend, rising for the first time in three days off a weaker yen boosting sentiment in the exporter-heavy market, but worries about a potential banking crisis weighed on financial shares, capping gains.
The Nikkei share average edged up 0.33%, or 91.62 points, to close at 27,476.87, while the broader Topix rose 0.33% too, or 6.52 points, to 1,961.84.
Among the Tokyo Stock Exchange’s 33 industry sectors, land transport was the best performer, climbing 1.78%. Banking was the biggest decliner, down 0.54%.
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China and Hong Kong stocks fell, led by Chinese state-owned enterprises and tech shares, as China’s industrial profit slump and geopolitical tensions dented sentiment.
Profits at industrial firms in China declined 22.9% in the first two months of 2023 from the year before, as the factory sector struggles to claw its way out of the slump caused by Covid-related disruptions.
And a senior Communist Party official admitted on Saturday that the foundation of China’s economic recovery is not solid enough, warning of possible spillover effects from global economic problems.
The Shanghai Composite Index fell 0.44%, or 14.26 points, to 3,251.40, while the Shenzhen Composite Index on China’s second exchange edged up 0.11%, or 2.40 points, to 2,119.18.
Tech stocks traded in Hong Kong slumped 1.7%, led by Meituan and Xiaomi. Shares of Meituan declined as much as 6.7%, following its fourth-quarter earnings release. The Hang Seng Index dropped 1.75%, or 347.99 points, to 19,567.69.
Shares in Chinese search engine giant Baidu fell more than 3% after it cancelled a planned livestreamed product launch related to its ChatGPT-like Ernie bot.
Elsewhere across the region, Sydney and Singapore rose, following a positive finish on Wall Street last week. Indian stocks advanced with Mumbai’s signature Nifty 50 index up 0.76%, or 129.15 points, at 17,074.20.
MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.3%, led by a 0.9% drop in Chinese blue chips.
Deutsche Bank Jitters
Globally, the mood remained jittery after shares in Deutsche Bank fell 8.5% on Friday and the cost of insuring its bonds against the risk of default jumped sharply, along with the credit default swaps (CDS) of many other banks.
“The current level of credit default swaps for European banks is just a little lower than it was during the height of the European financial crisis in 2013,” Naeem Aslam, chief investment officer at Zaye Capital Markets, said.
S&P 500 futures firmed 0.3% and Nasdaq futures 0.4%. EUROSTOXX 50 futures rallied 1.1% and FTSE futures 0.7%.
Over in the United States, depositors have been fleeing smaller banks for their larger cousins or to money market funds. Flows to money market funds have risen by more than $300 billion in the past month to a record atop $5.1 trillion.
Minneapolis Fed President Neel Kashkari said on Sunday officials were watching “very, very closely” to see if the banking stress led to a credit crunch that threatens to tip the economy into recession.
Oil Prices Flat
Yields on two-year Treasuries have fallen an astonishing 102 basis points so far this month to stand at 3.77%, while the entire yields curve out to 30 years is below the 4.85% effective funds rate.
That dive has sometimes been a drag on the dollar, at least against the safe-haven Japanese yen where it stands at 130.60 yen, having touched a seven-week low of 129.65 last week.
The drop in yields has combined with the run from risk to burnish gold, which was trading at $1,975 an ounce after reaching a high above $2,009 last week.
Oil prices were little changed, and are nursing losses of almost 10% for the month as worries about global growth undermine commodities in general. Brent fell 1 cent to $74.98 a barrel, while US crude added 2 cents to $69.28 per barrel.
Key figures
Tokyo – Nikkei 225 > UP 0.33% at 27,476.87 (close)
Hong Kong – Hang Seng Index < DOWN 1.75% at 19,567.69 (close)
Shanghai – Composite < DOWN 0.44% at 3,251.40 (close)
London – FTSE 100 > UP 0.64% at 7,452.95 (0938 GMT)
New York – Dow > UP 0.41% at 32,237.53 (Friday close)
- Reuters with additional editing by Sean O’Meara
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