SYDNEY (Reuters) – Asian stocks saw early losses on Monday after data confirmed that the Chinese economy had recovered last quarter as factory output increased, partially offsetting recent disappointing news about US consumer spending.
Chinese blue chips were up 0.8% after the economy reportedly grew 6.5% in the fourth quarter, compared to a year earlier, with a top forecast of 6.1%.
Industrial production for December also exceeded estimates, although retail sales missed the mark.
“Despite the latest dip in retail sales, we see a lot of upside for consumption as households cut the excess savings they built up last year,” said Julian Evans-Pritchard, senior China economist at Capital economics.
“Meanwhile, the tailwinds of last year’s stimulus packages should keep industry and construction strong for a while.”
MSCI’s widest index of Asia-Pacific stocks outside Japan narrowed losses and declined 0.3% after a series of record highs in recent weeks. Japan’s Nikkei fell 0.8% from its 30-year high.
E-Mini futures for the S&P 500 are down 0.2%, although Wall Street will be closed Monday due to a holiday. EUROSTOXX 50 futures eased 0.2% and FTSE futures 0.1%.
The rebound in China was in stark contrast to the US and Europe, where the spread of the coronavirus has scarred consumer spending, underscored by the bleak US retail sales reported Friday.
Also clear are doubts about how much of US President-elect Joe Biden’s stimulus package will make it through Congress, given Republican opposition, and the risk of more mob violence at his inauguration on Wednesday.
“The data casts doubt on the sustainability of the recent rise in bond yields and the rise in inflation compensation,” ANZ analysts said in a note.
“There is a lot of good news about vaccines and incentives priced in stocks, but the optimism is being challenged by the realities of the difficult months ahead,” they warned. “The risk across Europe is that lockdowns are expanding and that US cases could increase sharply as the UK COVID variant spreads.”
That will focus this week on earnings expectations based on company results, including BofA, Morgan Stanley, Goldman Sachs and Netflix.
The poor US data helped Treasuries to recoup some of their recent steep losses, with 10-year yields trading at 1.087%, down from last week’s high of 1.187%.
In turn, the more down-to-earth mood boosted the safe-haven US dollar, driving a bearish market deeply short. Speculators increased their net dollar short position to the largest since May 2011 in the week ending January 12.
The dollar index duly strengthened to 90,816, moving away from its recent 2-1 / 2-year low of 89.206.
The euro had retreated to $ 1.2074 from its January peak at $ 1.2349, while the dollar remained stable on the yen at 103.78 and well above its recent low of 102.57.
The Canadian dollar fell to $ 1.2773 a dollar after Reuters reported that Biden planned to revoke the license for the Keystone XL oil pipeline.
Biden’s choice of Treasury Secretary Janet Yellen is expected to rule out the search for a weaker dollar when he testifies on Capital Hill on Tuesday, the Wall Street Journal reported.
Gold prices were undermined by the dollar’s rebound, bringing the metal to $ 1,828 an ounce from its January high of $ 1,959.
Oil prices ran into gains on fears that the spread of tightening lockdowns would hurt demand worldwide. [O/R]
Brent futures fell 52 cents to $ 54.58 a barrel, while US crude oil fell 44 cents to $ 51.92.
Edited by Shri Navaratnam and Gerry Doyle