Asian stock indexes began the week mostly on the front foot but gains were capped by an air of nervousness on trading floors, with interest rates almost certain to rise again in the US and Europe in the next few days.
And while Japan’s main benchmark tracked Wall Street’s surge late last week and China’s mainland bourses enjoyed a post-Lunar New Year holiday jump, Hong Kong stumbled as traders reeled in their ambitions for the months ahead.
Japan’s Nikkei index rose, although its advance was limited by caution ahead of the US Federal Reserve’s meeting this week and domestic corporate earnings announcements.
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The Nikkei share average edged up 0.2%, or 50.8 points, to close at 27,433.40, while the broader Topix was down 0.01%, or 0.26 points, to 1,982.40.
Wall Street rose on Friday, marking the end of a rocky week in which economic data and corporate earnings guidance hinted at softening demand but also economic resilience ahead of the US Federal Open Market Committee (FOMC) this week.
A string of high profile earnings reports are on tap globally, notably from Apple, Amazon, Alphabet and Meta Platforms, among others.
Investors are also reacting to the Japanese corporate outlook as the earnings season reaches its peak this week.
Hong Kong stocks, though, saw their biggest drop in seven weeks with traders having second thoughts about the global economic picture and China’s post-Covid recovery rate.
The Hang Seng Index fell 2.73%, or 619.17 points, to 22,069.73 while its Tech Index fell 4.8%. Developer Country Garden fell 8.3% while Alibaba Group Holding plummeted 7.1%.
Lunar New Year Bump
On the Chinese mainland stocks jumped after the week-long Lunar New Year holidays, as strong consumption and a rebound in travel during the break boosted investor sentiment.
Beijing reported Lunar New Year travel trips inside China surged 74% from last year, though that was still only half of pre-pandemic levels.
China’s CSI 300 Index rose as much as 2.1% to touch a half-year high. The Shanghai Composite Index rose 0.14%, or 4.50 points, to 3,269.32, while the Shenzhen Composite Index on China’s second exchange edged up 1.16%, or 24.56 points, to 2,150.38.
Elsewhere across the region, Taiwan jumped 3.1% while Indian stocks advanced with Mumbai’s signature Nifty 50 index up 0.25%, or 44.60 points, at 17,648.95.
MSCI’s broadest index of Asia-Pacific shares outside Japan is up 11% in January so far, at a nine-month high, but the index was off 0.2% on Monday.
Tech Giants’ Earnings
Globally, investors will be waiting on interest rates rises in Europe and the United States, along with US jobs and wage data that may influence how much further they still have to go.
S&P 500 futures and Nasdaq futures both eased 0.3%, while Eurostoxx 50 futures and FTSE futures dipped 0.2%.
Investors are confident the Federal Reserve will raise rates by 25 basis points on Wednesday, followed the day after by half-point hikes from the Bank of England and European Central Bank, and any deviation from that script would be a real shock.
Just as important will be the guidance on future policy with analysts expecting a hawkish message of inflation is not yet beaten and more needs to be done.
“With US labour markets still tight, core inflation elevated, and financial conditions easing, Fed chair Powell’s tone will be hawkish, stressing that a downshifting to a 25bp hike doesn’t mean a pause is coming,” said Bruce Kasman, chief economist at JPMorgan, who expects another rise in March.
As for Wall Street’s recent rally, much will depend on earnings from the tech world’s big players like Apple.
“Apple will give a glimpse into the overall demand story for consumers globally and a snapshot of the China supply chain issues starting to slowly abate,” wrote analysts at Wedbush.
Dollar Drop Boosts Gold
Market pricing of early Fed easing has been a burden for the dollar, which has lost 1.6% so far this month to stand at 101.790 against a basket of major currencies.
The dollar has even lost 1.3% on the yen to 129.27 despite the Bank of Japan’s dogged defence of its uber-easy policies.
The drop in the dollar and yields has been a boon for gold, which is up 5.8% for the month so far at $1,930 an ounce.
China’s rapid reopening is seen as a windfall for commodities in general, supporting everything from copper to iron ore to oil prices.
The oil market was hesitant on Monday, with Brent off 11 cents at $86.55 a barrel, while US crude eased 3 cents to $79.65.
Key figures
Tokyo – Nikkei 225 > UP 0.19% at 27,433.40 (close)
Hong Kong – Hang Seng Index < DOWN 2.73% at 22,069.73 (close)
Shanghai – Composite > UP 0.14% at 3,269.32 (close)
London – FTSE 100 < DOWN 0.24% at 7,746.25 (0935 GMT)
New York – Dow > UP 0.08% at 33,978.08 (Friday close)
- Reuters with additional editing by Sean O’Meara
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