Asia shares step back, await China economic update

Asian share markets retreated from highs today. — Reuters pic

SYDNEY, Jan 18 — Asian share markets retreated from highs today as disappointing news on US consumer spending tempered risk sentiment ahead of a closely-watched reading on the health of the Chinese economy.

Also evident 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 broadest index of Asia-Pacific shares outside Japan lost 0.3 per cent having hit a string of record peaks in recent weeks. Japan’s Nikkei slipped 1 per cent and away from a 30-year high.

E-Mini futures for the S&P 500 dipped 0.3 per cent, though Wall Street will be closed today for a holiday.

Chinese GDP data are expected to show growth picked up to an annual 6.1 per cent last quarter, from 4.9 per cent in the third quarter. Monthly figures on retail sales and industrial output should show brisk activity as the year ended.

“We expect Q4 Chinese GDP growth accelerated to an above-consensus 6.5 per cent a year because of robust industrial output, the recovery in services and strong exports,” said Joseph Capurso, head of international economics at CBA.

“The data will confirm the Chinese economy ended the year on a strong footing.”

That would be a marked contrast to the US and Europe where the spread of coronavirus has scarred consumer spending, underlined by dismal US retail sales reported on Friday.

“The data bring into question the durability of the recent move higher in bond yields and the rise in inflation compensation,” said analysts at ANZ in a note.

“There’s a lot of good news around vaccines and stimulus priced into equities, but optimism is being challenged by the reality of the tough few months ahead,” they warned. “The risk across Europe is that lockdowns will be extended, and US cases could lift sharply as the UK Covid variant spreads.”

That will put the focus on earnings guidance from corporate results this week, which include BofA, Morgan Stanley, Goldman Sachs and Netflix.

The poor US data helped Treasuries pare some of their recent steep losses and 10-year yields were trading at 1.087 per cent, down from last week’s top of 1.187 per cent.

The more sober mood in turn boosted the safe-haven US dollar, catching a bearish market deeply short. Speculators increased their net short dollar position to the largest since May 2011 in the week ended January 12.

The dollar index duly rallied to 90.837, and away from its recent 2.5-year trough at 89.206.

The euro had retreated to US$1.2068, from its January peak at US$1.2349, while the dollar held steady on the yen at 103.93 and well above the recent low at 102.57.

Biden’s pick for Treasury Secretary, Janet Yellen, is expected to rule out seeking a weaker dollar when testifying on Capital Hill tomorrow, the Wall Street Journal reported.

Gold prices were undermined by the bounce in the dollar leaving the metal down at US$1,812 an ounce, compared to its January top of US$1,959.

Oil prices ran into profit-taking on worries the spread of increasingly tight lockdowns globally would hurt demand.

Brent crude futures were off 12 cents at US$54.98 a barrel, while US crude eased 11 cents to US$52.25. — Reuters