SYDNEY (Reuters) – Asian equities faltered on Monday as investors wait to see if US gains can justify high valuations, while bond markets could test according to very strong readings of inflation and sales in the US detail this week.
MSCI’s broader Asia-Pacific stock index outside of Japan fell 0.6% in slow trading. Tokyo’s Nikkei was down 0.5%, while South Korean stocks were nearly flat.
Chinese blue chips relaxed 0.9% ahead of a wave of economic data from the country.
Investors were eager to see how the shares of Alibaba Group Holding Ltd came out after China hit a record 18 billion yuan ($ 2.752 billion) fine on the e-commerce giant.
The reverberations could be felt beyond China, as more than a third of the shares are owned by US investors and, as the shares account for more than 8% of the MSCI EM index.
Some felt that the decision was already about the price of the shares.
“Since the IPO was canceled and with antitrust laws in place, the market expects Alibaba to pay a price,” said Louis Tse, CEO of Wealthy Securities in Hong Kong.
“I think it’s good for the stock price now that the news has been delivered and it’s finally clarified.”
Nasdaq futures fell 0% on Monday, as did the S&P 500 futures. The EUROSTOXX 50 futures fell on both sides of the plan, while FTSE futures fell 0.2%.
Growth and technology stocks had seen some resurgence last week, as ten-year U.S. Treasury yields fell to 1.66%, from a 14-month high of 1.766%.
Thomas Mathews, market economist at Capital Economics, doubted, however, that the bond recovery would last.
“Given the pace of the economic recovery and the Fed’s apparent unwillingness to prevent higher yields, we believe long-term yields will rise again,” he said.
Over the weekend, Federal Reserve Chairman Jerome Powell said the economy was about to start growing much faster, though the coronavirus remained a threat.
This week’s data is expected to show that U.S. inflation jumped in March, while retail sales are seen to rise perhaps even with a double-digit gain. The Treasury will also test the lawsuit with $ 100 billion in debt deals this week.
“Rapid economic growth, backed by reopening and an accommodative fiscal policy, can disproportionately benefit stock market sectors that are more sensitive to the health of the economy,” Mathews told Capital.
“And the composition of this growth is likely to be more skewed toward these sectors than it could have been during a typical economic expansion.”
It is likely to have benefits as well. Banks begin the first quarter earnings season this week with Goldman Sachs, JPMorgan and Wells Fargo scheduled to report Wednesday.
Analysts expect the profits of the S&P 500 companies to show a 25% jump over the previous year, according to data from Refinitiv IBES. This would be the strongest performance of the quarter since 2018.
The decline in yields was enough to see how the dollar came out of the boil last week. It was last listed at 92,265 against a basket of currencies, down from a high of 93,439.
It was flat at 109.60 yen and below its March high of 110.96. The euro remained at $ 1.1892 and above its recent low of $ 1.1702.
Gold prices held at a slow pace at $ 1,739 an ounce, having not maintained the $ 1,758 high last week. [GOL/]
Last week, oil prices fell by around 2%, as production increased and COVID-19 blockades were renewed in some countries which offset optimism about the recovery in fuel demand. [O/R]
Brent traded up 28 cents Monday at $ 63.24 a barrel, while U.S. crude added 22 cents to $ 59.54 a barrel.
Edited by Shri Navaratnam