Asia’s stock indexes were in retreat on Monday as investor mood darkened ahead of US inflation data and amid growing pessimism over China’s erratic recovery.
Geopolitical tensions were also on the radar as disruptions in the Red Sea raised shipping costs in Europe, while the Israeli conflict with Hamas threatened to spread to Lebanon.
China’s blue-chip index hit a nearly five-year low before the close, while Hong Kong stocks shed nearly 2% amid weakening confidence in the mainland economy.
Also on AF: Shipping Chaos Set to be ‘New Normal’ Amid War, Climate Change
Sentiment was also dampened by news that China’s securities regulator is allowing mutual fund managers to sell more shares than they buy each day, removing a net-selling ban introduced late last year.
The CSI300 Index ended down 1.29%, its lowest closing level since February 2019.
The Shanghai Composite Index fell 1.42%, or 41.65 points, to 2,887.54, to end at its lowest since April, 2022, while the Shenzhen Composite Index on China’s second exchange dropped 1.88%, or 33.34 points, to 1,740.08.
In Hong Kong, the benchmark Hang Seng Index dropped 1.88%, or 310.88 points, to 16,224.45, led by tech shares. An index tracking Chinese developers dropped 2.2%.
Elsewhere across the region, in earlier trade, Sydney, Seoul, Mumbai, Manila, Jakarta, Bangkok and Wellington were also all in the red. Tokyo was closed for a holiday.
Early gains were quickly erased and MSCI’s broadest index of Asia-Pacific shares outside Japan lost another 0.84%, after retreating 2.5% last week.
The sour mood spread to Eurostoxx 50 futures which dipped 0.2%, as did FTSE futures. S&P 500 futures and Nasdaq futures were both down around 0.1%.
The S&P 500 lost 1.5% last week to break a nine-week winning stretch, which had been its longest since 1989. The index’s 24% rally last year means valuations are looking a little stretched, so much is riding on the results season.
Major banks including JPMorgan Chase and Citigroup start the reporting rush on Friday with hopes high for upbeat profits.
Consensus forecasts are that S&P 500 profits rose 3% on the year, and Goldman Sachs sees risks of an even higher outcome.
US Dollar Edges Back
Futures are pricing in around 136 basis points of US rate cuts next year, compared to the Federal Reserve’s dot plot of 75 basis points.
The probability of a move as early as March has been pared somewhat to a still-high 64%, and that will likely shift again depending on Thursday’s US consumer price report.
Forecasts are for core CPI to rise 0.2% in December, pulling annual inflation down to 3.8% and its lowest since mid-2021.
There are at least four Fed speakers on the docket this week to offer their outlooks, with New York Fed President John Williams likely to be the most influential.
Inflation data from China and Tokyo are also due this week, with analysts looking for deflation to ease a touch in China.
In currency markets, the dollar surrendered a sliver of its recent gains to stand at 144.37 yen, having climbed 2.5% last week from 140.80.
The euro was almost flat at $1.0936, after slipping 0.9% last week. The dollar’s rally was a headwind for gold, which eased 0.5% to $2,036 an ounce.
Oil prices shed early gains to turn lower as price cuts from Saudi Arabia offset the risk of supply disruptions in the Red Sea. Brent shed 83 cents to $77.93 a barrel, while US crude fell 84 cents to $72.97 per barrel.
Key figures
Tokyo – Nikkei 225 <> CLOSED
Hong Kong – Hang Seng Index < DOWN 1.88% at 16,224.45 (close)
Shanghai – Composite < DOWN 1.42% at 2,887.54 (close)
London – FTSE 100 < DOWN 0.51% at 7,650.64 (0929 GMT)
New York – Dow > UP 0.07% at 37,466.11 (Friday close)
- Reuters with additional editing by Sean O’Meara
Read more:
China Evergrande Fiasco Worsens, With Arrest of EV Unit Exec
India Digital Currency Transactions Top 1m a Day in December
Chinese Shadow Bank Zhongzhi Files for Bankruptcy, Court Says
Hang Seng Slides on China Worries, Nikkei Boosted by Weak Yen
