* Asian stock markets: tmsnrt.rs/2zpUAr4
* Nikkei discount 1%, trade diluted by US holiday
* Eyes on China GDP data for economic outlook
* US dollar, Treasury bill holds gains as risk appetite declines
SYDNEY, Jan. 18 (Reuters) – Asian stock markets pulled back from the highs on Monday as disappointing news about US consumer spending dampened risk sentiment in anticipation of a closely-watched lecture on the health of the Chinese economy.
Also clear were 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.
MSCI’s widest index of Asia-Pacific stocks outside Japan fell 0.3% after a series of record highs in recent weeks. Japan’s Nikkei fell 1% from its 30-year high.
E-Mini futures for the S&P 500 are down 0.3%, although Wall Street will be closed on Monday due to a holiday.
Chinese GDP data is expected to show growth picked up to 6.1% year-on-year in the past quarter, from 4.9% in the third quarter. Monthly retail sales and industrial output figures are expected to show solid activity at the end of the year.
“We expect China’s GDP growth to accelerate to 6.5% pa above consensus in the fourth quarter, thanks to robust industrial output, the recovery of services and strong exports,” said Joseph Capurso, head of international economics at CBA.
“The data will confirm that the Chinese economy ended the year well.”
That would be 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.
“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 rose to 90,837, and away from its recent 2-1 / 2-year low of 89.206.
The euro had retreated to $ 1.2068 from its January peak at $ 1.2349, while the dollar remained stable on the yen at 103.93 and well above its recent low of 102.57.
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, causing the metal to fall to $ 1,812 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.
Brent crude futures declined 12 cents to $ 54.98 a barrel, while US crude oil fell 11 cents to $ 52.25.
Editing by Shri Navaratnam