Asian stocks rallied at the start of the week but advances were limited by continuing worries over more central bank tightening to come and the overall gloomy global picture.
China’s markets enjoyed the best day with investors there buoyed by hopes of post-Covid recovery gathering pace with data showing traffic congestion and subway crowds in its big cities had rebounded to near-normal levels.
Japanese shares posted smaller gains as cautious traders awaited a week of important US and global economic data, as well as testimony by the incoming Bank of Japan (BOJ) leadership team.
Also on AF: China Banks Hit by Rush to Pay Mortgages Off at Lower Rates
The Nikkei edged up 0.07% to 27,531.94 at the close, staying near the middle of its range since January 24. The broader Topix gained 0.39% to 1,996.78.
The Nikkei’s underwhelming showing was mostly due to weakness in its heavyweight chip stocks that followed Wall Street’s declines on Friday, while a rise in US bond yields lifted financial shares and drove gains on the Topix.
Declines in energy shares also stood out on the Nikkei amid a slide in crude oil prices, though earnings produced a big winner in tyre-maker Yokohama Rubber, which soared 10.2%.
Inflation figures this week will be scrutinised for further clues about which way Japan’s economy is heading, as will key purchasing manager surveys from the United States and other major economies.
The main event for Japanese markets, though, will be BOJ Governor nominee Kazuo Ueda’s lower house testimony on Friday, which will be followed by an upper house appearance next Monday.
While Ueda has shown himself so far to be a policy dove, investors still expect an end to unpopular yield curve controls during his tenure, and will watch for indications of how soon that could be done.
China New Home Sales Rise
China stocks saw their best day since the end of November as risk appetite improved on hopes of the economy gradually shifting from reopening to recovery, despite the pressure from US-China tensions.
New home sales in 16 Chinese cities rose for the third straight week, boosting shares of Chinese property developers. The CSI 300 Real Estate Index advanced nearly 2.5%.
And tech giants listed in Hong Kong gained 1.3% despite the recent slump in relations between Washington and Beijing.
China’s blue-chip CSI300 Index closed up 2.5% and the Shanghai Composite Index gained 2.06%, or 66.31 points, to 3,290.34. Both indexes logged their biggest daily jump since November 29.
Meanwhile, Hong Kong’s Hang Seng benchmark finished up 0.81%, or 167.15 points, to 20,886.96, and the China Enterprises Index added 1%. The Shenzhen Composite Index on China’s second exchange advanced 1.72%, or 36.48 points, to 2,161.66.
Elsewhere across the region, Seoul, Sydney, Bangkok and Taipei rose though Mumbai, Singapore, Manila, Jakarta and Wellington fell.
North Korea Missile Tensions
Globally, a US holiday made for slow trading ahead of minutes of the latest Federal Reserve meeting and a reading on core inflation that could add to the risk of interest rates heading higher for longer.
Geopolitical tensions were ever present with North Korea firing more missiles and talk of Russia ramping up attacks in Ukraine before Friday’s one-year anniversary of the invasion.
There were reports the White House planned new sanctions on Russia, while Secretary of State Antony Blinken on Saturday warned Beijing of consequences should it provide material support, including weapons, to Moscow.
All of which made for a cautious start and MSCI’s broadest index of Asia-Pacific shares outside Japan nudged up 0.7%, after sliding 2.2% last week.
S&P 500 futures barely budged, as did Nasdaq futures. The S&P touched a two-week low on Friday as a run of strong US economic news suggested the Fed might have more to do on interest rates even after hiking a huge 450 basis points in 11 months.
“It’s the most aggressive Fed tightening in decades and US retail sales are at all-time highs; unemployment at 43-year lows; payrolls up over 500k in January and CPI/PPI inflation reaccelerating,” noted analysts at BofA. “That’s a Fed mission very much unaccomplished.”
Nvidia Earnings Incoming
Earnings season continues this week with major retailers Walmart and Home Depot set to offer updates on the health of the consumer.
Other firms reporting include chip company Nvidia, Covid-19 vaccine maker Moderna and e-commerce store front eBay.
The prospect of more Fed hikes has lifted Treasury yields and generally supported the dollar, which hit a six-week top on a basket of currencies last week.
Higher yields and a firmer dollar have not been good for gold, which was holding at $1,843 an ounce and not far from a five-week low of $1,807.
Oil prices were trying to rally, after shedding around 4% last week amid signs of ample supply and concerns over future demand. Brent edged up 58 cents to $83.58 a barrel, while US crude rose 45 cents to $76.79.
Key figures
Tokyo – Nikkei 225 > UP 0.07% at 27,531.94 (close)
Hong Kong – Hang Seng Index > UP 0.81% at 20,886.96 (close)
Shanghai – Composite > UP 2.06% at 3,290.34 (close)
London – FTSE 100 < DOWN 0.02% at 8,002.86 (0936 GMT)
New York – Dow > UP 0.39% at 33,826.69 (Friday close)
- Reuters with additional editing by Sean O’Meara
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