SYDNEY (Reuters) – Asian stocks reduced their initial losses on Monday as data confirmed that China’s economy rebounded in the last quarter with increased factory production, helping to partially offset recent disappointing news about US consumer spending.
Chinese blue chips gained 0.8% after the economy grew 6.5% in the fourth quarter, compared to the previous year, exceeding forecasts of 6.1%.
December’s industrial production also exceeded estimates, although retail sales missed the mark.
“Despite the latest drop in retail sales, we see a sharp increase in consumption as families reduce the excess savings they accumulated last year,” said Julian Evans-Pritchard, senior economist at Capital economics for China.
“In the meantime, the favorable winds of last year’s stimulus are expected to keep industry and construction strong for some time to come.”
The broader MSCI index for Asia Pacific stocks outside Japan reduced losses and fell 0.3%, having reached a series of record highs in recent weeks. Japan’s Nikkei fell 0.8% and moved away from a 30-year high.
E-Mini futures for the S&P 500 fell 0.2%, although Wall Street closes on Monday by holiday. EUROSTOXX 50 futures declined 0.2% and FTSE futures 0.1%.
The recovery in China was a marked contrast to the United States and Europe, where the spread of the coronavirus hampered consumer spending, underlined by the depressing retail sales in the United States, reported on Friday.
Doubts are also evident about how much of the US President-elect Joe Biden’s stimulus package will reach Congress due to Republican opposition, and the risk of further mob violence in his possession on Wednesday.
“The data question the durability of the recent upward movement in bond yields and the increase in compensation for inflation,” ANZ analysts said in a note.
“There is a lot of good news about vaccines and stock price stimuli, but optimism is being challenged by the reality of the difficult months ahead,” they warned. “The risk across Europe is that the blockages will be extended and cases in the U.S. may increase dramatically as the UK’s COVID variant spreads.”
This will put the focus on earnings guidance for this week’s corporate results, which include BofA, Morgan Stanley, Goldman Sachs and Netflix.
Weak US data helped Treasury bills reduce some of its recent losses and 10-year yields were trading at 1.087%, down from last week’s 1.177% top.
The more sober climate, in turn, boosted the safe-haven dollar, catching a deeply sold bear market. Speculators have increased their short dollar position to the highest since May 2011, in the week ending January 12.
The dollar index duly signed at 90.816, and far from its recent 2-1 / 2 year low at 89.206.
The euro retreated to $ 1.2074, from its January peak at $ 1.2349, while the dollar remained stable against the yen at 103.78 and well above the recent low at 102.57.
The Canadian dollar fell to $ 1.2773 per dollar after Reuters reported that Biden planned to revoke the license for the Keystone XL pipeline.
Biden’s choice for Treasury Secretary Janet Yellen is likely to rule out the search for a weaker dollar when testifying at Capital Hill on Tuesday, the Wall Street Journal reported.
Gold prices were hurt by the dollar’s rise, leaving the metal at $ 1,828 an ounce, compared to the January peak of $ 1,959.
Oil prices have generated profit due to concerns that the spread of increasingly rigid blockages around the world would hurt demand. [O/R]
Brent crude futures fell 52 cents to $ 54.58 a barrel, while US oil fell 44 cents to $ 51.92.
Editing by Shri Navaratnam and Gerry Doyle