(Bloomberg) – Asian stocks fell on Tuesday, led by weaker Chinese stocks, as deepening market pessimism increased pressure on policymakers in the world’s second-largest economy to cut interest rates.
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Hong Kong stock prices fell about 2%, and mainland stocks were expected to fall for the third day in a row. Monday’s liquidation order for China Evergrande Group sent the Bloomberg index of Chinese developers down more than 4%.
“Valuations are clearly cheap, but there are good reasons for this, including self-inflicted damage in the tech and property sectors,” said Kieran Calder, head of Asian equity research at Union Bancair Privy. “It is our view that investor confidence will not return until the real estate sector finally recovers.The ongoing news flow shows that the real estate crisis remains serious and not easily resolved. You can see that it’s not.”
China’s benchmark government bond yield has fallen to its lowest level in about 22 years as expectations for further monetary easing rise.
The Chinese government surprised markets last week by cutting the amount of cash banks need to set aside as reserves, but the measures are “more monetary and more piecemeal”, according to Abdon Asia. said Shin Yao Ng, Director of Asian Equity Investment. He added that he “needs massive fiscal stimulus to boost confidence.”
BYD’s share price also weighed on Hong Kong’s benchmark stocks after the EV maker’s share price fell after it missed profit estimates. Elsewhere, shares in South Korea and Japan traded in a narrow range, while European stock futures edged higher.
Oil prices rose after Aramco announced that the Saudi government had asked it to keep its oil production capacity at 12 million barrels a day instead of continuing to increase it to 13 million barrels per day. Markets also awaited a U.S. response to a deadly attack on U.S. troops in Jordan, which risks escalating tensions in a region that is key to global oil production.
Meanwhile, Treasury yields widened their decline on Tuesday after the U.S. Treasury cut its quarterly borrowing estimates, allaying concerns that large amounts of debt will be issued to finance the federal deficit. Contracts in U.S. stocks remained unchanged after Wall Street hit a new record.
Read: Credit spreads this low are an exception outside of pandemic times
The New Zealand dollar sustained gains after hawkish comments from the country’s central bank officials. The dollar was little changed this week as traders awaited US data and Federal Reserve policy decisions.
US technology revenue
In the U.S., the coming days will be a tough time for stock valuations, especially for large-cap U.S. technology companies, given that investors are pricing in strong earnings growth expectations in anticipation of a sooner-than-expected interest rate cut by Fed officials. The evaluation will be crucial in determining whether it is sustainable, the paper said. Marko Kolanovic of JPMorgan Chase.
This week will be the busiest week for U.S. earnings this season, with Microsoft, Alphabet, Apple, Amazon.com, and Meta Platforms reporting their results. There is concern as most of the megacaps are still in record territory. Investors are overexposed to just a handful of stocks, which could mean some pain if quarterly results are down.
“This week could be the key,” said Chris Larkin of Morgan Stanley’s E*TRADE. “For the market to sustain its recent break, it will need to avoid disappointment in big tech’s results this week, get some encouraging news on interest rates from the Fed, and see solid but less-than-hot jobs data. Might happen. “
Investors are also keeping an eye on the Federal Reserve’s interest rate decisions and a wealth of data on everything from consumer confidence to employment. Heading into this week’s two-day Fed policy meeting, investors are placing a near-even probability that the Fed will begin lowering borrowing costs at its next decision in March.
This week’s main events:
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Eurozone Economic Confidence, GDP, Consumer Confidence, Tuesday
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U.S. Conference Consumer Confidence Index, JOLTS Jobs, Tuesday
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Microsoft, Alphabet earnings, Tuesday
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China Non-Manufacturing PMI, Manufacturing PMI, Wednesday
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Japan’s industrial production, retail sales, housing starts, Wednesday
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The Bank of Japan announced a summary of its January policy meeting on Wednesday.
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Boeing releases financial results on Wednesday amid U.S. government safety investigation
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Fed interest rate decision and Fed Chairman Jerome Powell’s Wednesday press conference
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U.S. Treasury Quarterly Refunds Wednesday
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China Caixin Manufacturing PMI Thursday
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Eurozone S&P World Manufacturing PMI, CPI, Unemployment Rate, Thursday
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US productivity, construction spending, ISM manufacturing, new unemployment claims, Thursday
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Apple, Amazon, Meta, Deutsche Bank, BNP Paribas earnings, Thursday
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Bank of England interest rate decision Thursday
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US employment statistics, University of Michigan consumer sentiment, factory orders, Friday
The main movements in the market are:
stock
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As of 6:35 a.m. London time, S&P 500 futures were little changed. S&P500 rose 0.8%
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Nikkei 225 futures (OSE) are almost unchanged.Nasdaq 100 rises 1%
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Hong Kong’s Hang Seng fell 2.1%
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The Shanghai Composite fell 1.4%.
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Euro Stoxx50 futures rose 0.4%
currency
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Bloomberg Dollar Spot Index little changed
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The euro fell 0.1% to $1.0822.
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The Japanese yen rose 0.1% to 147.30 yen to the dollar.
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The offshore yuan was almost unchanged at 7.1869 yuan to the dollar.
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The Australian dollar was almost unchanged at US$0.6613.
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The British pound was almost unchanged at $1.2704.
cryptocurrency
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Bitcoin rose 0.3% to $43,330.63
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Ether fell 0.1% to $2,303.44.
bond
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The 10-year Treasury yield fell 3 basis points to 4.04%.
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Japan’s 10-year bond yield fell 1.5 basis points to 0.705%.
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Australian 10-year bond yield falls 7 basis points to 4.14%
merchandise
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West Texas Intermediate crude rose 0.6% to $77.22 a barrel.
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Spot gold rose 0.1% to $2,035.31 an ounce.
This article was produced in partnership with Bloomberg Automation.
–With assistance from Tassia Sipahutar.
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