SYDNEY (Reuters) – Asian stocks faltered on Monday as concerned investors wait to see if U.S. gains can justify skyrocketing valuations, while a rise in bonds can be tested by what should be very strong U.S. inflation and retail this week.
MSCI’s widest index of Asia-Pacific stocks outside Japan fell 1.1% in slow trading. Tokyo’s Nikkei fell 0.6%, while South Korean stocks were almost flat.
The Nifty 50 index fell 2.4% as India overtook Brazil, becoming the country with the second most COVID-19 cases.
Chinese blue chips lost 1.5% ahead of a rush of economic data from the country.
Shares in Alibaba Group Holding Ltd were up 16% after China imposed a record fine of 18 billion yuan ($ 2.75 billion) on the e-commerce giant. More than a third of the shares are owned by US investors and make up more than 8% of the MSCI EM index.
“Since Ant’s IPO was canceled and with antitrust laws in the pipeline, the market expects Alibaba to pay a price,” said Louis Tse, general manager of Wealthy Securities in Hong Kong.
“I think it’s good for the stock price now that the news has been released and it has finally been cleared up.”
Nasdaq futures fell 0.3% Monday, as did S&P 500 futures. EUROSTOXX 50 futures showed both sides of a flat position, while FTSE futures fell 0.3%.
Growth and technology stocks had seen somewhat of a rebound last week as the US 10-year yield on US Treasuries fell to 1.66% from a 14-month high of 1.776%.
However, Thomas Mathews, a market economist at Capital Economics, doubted the bond’s rise would last.
“Given the pace of the economic recovery and the Fed’s apparent reluctance to stand in the way of higher yields, we think long-term interest rates will rise again soon,” he said.
Over the weekend, Federal Reserve chairman Jerome Powell said the economy was on the verge of growing much faster, although the coronavirus remained a threat.
This week’s data is expected to show US inflation rising in March, while retail sales are on the rise, perhaps even at double-digit gains. Treasury will also test demand this week with offers of $ 100 billion in debt.
“Rapid economic growth, supported by reopening and accommodative fiscal policies, could bring disproportionate benefits to those sectors of the stock market that are more sensitive to the health of the economy,” said Capital’s Mathews.
“And the composition of that growth is probably more skewed towards those sectors than during a typical economic expansion.”
It is probably also visible in the profit. Banks kick off their first-quarter earnings season this week, while Goldman Sachs, JPMorgan and Wells Fargo will report on Wednesday.
Analysts expect earnings for S&P 500 companies to show a 25% jump from a year earlier, according to data from Refinitiv IBES. That would be the strongest performance in the quarter since 2018.
The drop in revenues was enough to see the dollar come off boiling last week. It last traded at 92,265 against a basket of currencies, after peaking at 93,439.
It was flat on the yen at 109.60, below its March high of 110.96. The euro was at $ 1.1889 and above its recent low of $ 1.1702.
Gold prices remained at $ 1,737 an ounce after failing to hit $ 1,758 last week. [GOL/]
Oil prices fell about 2% last week as production increased and renewed COVID-19 lockdowns in some countries offset optimism about a recovery in fuel demand. [O/R]
Brent was up 3 cents on Monday at $ 62.98 a barrel, while US crude oil was flat at $ 59.32.
Edited by Shri Navaratnam and Ana Nicolaci da Costa