Stocks Mixed as Risks Shadow Steadier China Growth: Markets Wrap

Stocks were mixed Monday amid data showing steadying economic growth in China as well as ongoing challenges in the nation’s troubled property sector. Treasuries were steady and the dollar slipped.

Shares fluctuated in Hong Kong and dipped in China as traders weighed stronger-than-expected retail sales and industrial output, central bank liquidity support and a drop in home prices that hurt real-estate shares. Japanese equities gained, with stimulus plans softening the blow of an economic contraction. European, S&P 500 and Nasdaq 100 futures moved in tight ranges.

Beijing’s crackdown on real-estate leverage is among the headwinds for the world’s second-largest economy. There are now expectations that officials may try to help ailing developers. Chinese junk dollar bonds extended a rebound

Sovereign bond markets were comparatively calm following a period of pronounced swings due to uncertainty about whether high inflation will be sticky and the likely speed of interest-rate hikes. Bond-market expectations for inflation over the coming decade are near the highest since 2006.

Recent fixed-income gyrations point to the worry that central banks will have to tighten policies more quickly than expected to curb sustained inflation. In contrast, global stocks near record levels signal equity investors are reassured by corporate strength and arguments that price pressures are transitory.

“We’ve seen inflation prints that we haven’t seen in decades,” Terri Jacobsen, UBS Private Wealth Management managing director, said on Bloomberg Television. She added equities can continue rallying as global supply chain issues are resolved and corporate earnings stay strong, with the Federal Reserve staying patient on policy tightening.

Inflation Debate

Fed Bank of Minneapolis President Neel Kashkari said the U.S. central bank shouldn’t overreact to elevated inflation even as it causes pain, because it is likely to prove temporary. Treasury Secretary Janet Yellen said controlling the Covid-19 virus in the U.S. is the key to easing price pressures.

Elsewhere, President Joe Biden will meet virtually with Chinese President Xi Jinping on Monday. Tensions between the two countries have been building over issues including Taiwan and restrictions on sales of U.S. technology to China. 

In commodities, oil fell as traders wait to see what Biden might do to alleviate gasoline prices amid growing criticism about the impact of rising costs. Aluminum and base metals retreated in part on China’s property slowdown.

Meanwhile, Elon Musk raised the idea of selling more of his Tesla Inc. shares in online sparring with U.S. Senator Bernie Sanders. Musk offloaded almost $7 billion worth of Tesla stock over the past week, weighing on the shares of the electric-vehicle manufacturer.

What to watch this week:

• President Joe Biden, President Xi Jinping to meet virtually. Monday
• Fed Presidents Thomas Barkin, Esther George, Raphael Bostic, Patrick Harker speak at various events. Tuesday
• Reserve Bank of Australia Governor Philip Lowe delivers a speech. Tuesday
• RBA minutes of November meeting. Tuesday
• U.S. retail sales are poised to show an acceleration in October as consumer demand remains resilient. Tuesday
• Euro zone CPI. Wednesday
• Conference Board U.S. leading index, initial jobless claims. Thursday
• Fed’s Richard Clarida and Mary Daly speak at Asia Economic Policy Conference. Friday

For more market analysis, read our MLIV blog.

Stocks

• S&P 500 futures rose 0.1% as of 2:07 p.m. in Tokyo. The S&P 500 rose 0.7%
• Nasdaq 100 futures added 0.2%. The Nasdaq 100 rose 1%
• Japan’s Topix index rose 0.4%
• Australia’s S&P/ASX 200 Index climbed 0.3%
• South Korea’s Kospi rose 1.1%
• Hong Kong’s Hang Seng Index shed 0.1%
• China’s Shanghai Composite Index lost 0.4%
• Euro Stoxx 50 futures fell 0.1%

Currencies

• The Japanese yen was at 113.85 per dollar
• The offshore yuan traded at 6.3791 per dollar
• The Bloomberg Dollar Spot Index fell 0.1%
• The euro was at $1.1457, up 0.1%

Bonds

• The yield on 10-year Treasuries fell one basis point to 1.55%
• Australia’s 10-year bond yield fell two basis points to 1.78%

Commodities

• West Texas Intermediate crude fell 0.5% to $80.42 a barrel
• Gold was at $1,857.53 an ounce, down 0.4%

Source: Bloomberg