Markets

Hang Seng Falls on Downbeat Data, Nikkei Dips on Weak Yen

 

Asia’s major stock indexes began the week on the back foot with global growth worries, the conflict in the Middle East and anxiety over interest rates weighing on sentiment.

Investors were apprehensive ahead of a busy week of economic data, particularly a US November payrolls report on Friday, that will test market wagers on early and aggressive rate cuts from major central banks next year.

Japan’s Nikkei share average sank to a nearly three-week low as a stronger yen dented the earnings outlook for the nation’s exporters, with automakers leading the declines.

 

Also on AF: Toyota Plans Expanded Electric Vehicle Line-up for Europe

 

The yen pushed to a nearly three-month high of 146.235 per dollar on Monday before easing back to around 146.65.

The Nikkei closed down 0.60% at 33,231.27 after earlier sliding as much as 1.22% to reach 33,023.04 for the first time since November 14. The broader Topix slumped 0.83%.

China and Hong Kong stocks extended their losses as more economic data pointed to a slowdown in growth momentum, while a plunge in WuXi Biologics (Cayman) Inc shares on its disappointing forecast further dragged the markets down. The pharma tech giant’s shares were suspended from trading in Hong Kong after it fell over 23%.

Mixed factory activity numbers for China in November suggested more stimulus will be needed to shore up economic growth and the blue-chip CSI 300 Index dipped 0.65%

The Shanghai Composite Index dropped 0.29%, or 8.72 points, to 3,022.91, while the Shenzhen Composite Index on China’s second exchange retreated 0.34%, or 6.34 points, to 1,881.64.

Meanwhile, in the property sector, a hearing into a liquidation petition against China Evergrande Group was adjourned in a Hong Kong court to next month, with the judge asking the embattled developer to hold discussions with relevant authorities on debt restructuring terms.

Property stocks led the decline in China A-shares, down 2.3%, and Hong Kong’s Hang Seng Index dropped 1.09%, or 184.25 points, to 16,646.05.

Elsewhere across the region, Indian stocks advanced with Mumbai’s signature Nifty 50 index up 2.06%, or 416.95 points, at 20,684.85. MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.4%, led by gains in South Korea and Australia.

 

Treasuries Turnaround

Eurostoxx 50 futures and FTSE futures were a fraction firmer. S&P 500 futures dipped 0.1%, after finishing at a 20-month high on Friday, while Nasdaq futures lost 0.2%. The S&P 500 is up 19% for the year so far and just 4% away from its all-time peak.

The latest surge was stoked by wagers the next move by the Federal Reserve will be to cut rates, with Fed Chair Jerome Powell on Friday declining the opportunity to push back hard against aggressive market pricing.

Futures now imply a 71% chance the Fed will ease as soon as March, up from 21% a week ago, and are pricing in around 135 basis points of cuts for all of 2024.

The turnaround in Treasuries has been nothing short of astonishing as two-year yields fell 41 basis points in just a week, the best performance since the mini-crisis in US banks back in March.

So it was no surprise that some profit-taking emerged on Monday and nudged yields on 10-year notes up to 4.24%, still a long way from the October top of 5.02%.

Central bank meetings in Canada and Australia this week are both expected to see rates there unchanged.

 

Yen, Gold Upturn

The tumble in Treasury yields in turn pulled the rug out from under the dollar, particularly on the yen where it slid 1.8% last week and was last down at 146.56.

Speculation about an eventual unwinding of the Bank of Japan’s super-easy policies has added to the pressure on yen carry trades and could carry the Japanese currency back to its July highs around 138.00.

The dive in yields and the dollar has been a boon for non-yielding gold, which added 0.9% to $2,088 an ounce, after hitting a record of $2,111.39 an ounce.

Oil prices have not been so fortunate, amid doubts OPEC+ will be able to maintain planned output cuts. At the same time, US oil production is at record levels above 13 million barrels a day and rig counts are still rising.

The attacks on shipping in the Red Sea offered only fleeting support and Brent eased 17 cents to $78.71 a barrel, while US crude  fell 12 cents to $73.95.

 

Key figures

Tokyo – Nikkei 225 < DOWN 0.60% at 33,231.27 (close)

Hong Kong – Hang Seng Index < DOWN 1.09% at 16,646.05 (close)

Shanghai – Composite < DOWN 0.29% at 3,022.91 (close)

London – FTSE 100 < DOWN 0.68% at 7,478.347 (0935 GMT)

New York – Dow > UP 0.82% at 36,245.50 (Friday close)

 

  • Reuters with additional editing by Sean O’Meara

 

Read more:

China Evergrande Stock Jumps as Liquidation Hearing Put Off

China’s PBOC Has Room for More Reserve Ratio Cuts: Ex-Official

US Rules to Limit Chinese Access to EV Tax Credits Announced

Tech Drags on Nikkei, China Data Weighs on Hang Seng

 

 

Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.

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