(Bloomberg) — Stock selling deepened in Asia after new data redoubled concerns about China’s economy and investors limited bets on Federal Reserve interest rate cuts .
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Hong Kong stocks led the decline, with the Hang Seng Index falling almost 4%. Mainland China’s benchmark CSI 300 index also fell 1.6%. The losses came after official figures showed that while China had met its 2023 economic target, the country’s real estate crisis had worsened and domestic demand remained sluggish.
A regional indicator fell 1.7% as Japanese stocks reversed earlier gains. U.S. and European stock futures also continued to fall, while short-term Treasury yields and the dollar rose slightly.
“China’s nominal GDP growth in 2023 is lower than real GDP growth, due to deflationary pressures. The labor market is weak,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management Co. “This suggests that China is likely growing below its growth potential. »
The weaker tone in Asia came after the S&P 500 lost 0.4% on Tuesday and a selloff in Treasuries that sent 10-year yields up about 12 basis points. While 10-year yields were flat on Wednesday in Asia, their two-year counterparts rose another 2 basis points.
The moves follow comments from Fed Governor Christopher Waller, who urged caution but said a rate cut this year was possible if inflation approached the central bank’s target. When the time is right, rates should be lowered “methodically and carefully,” Waller said during a virtual event Tuesday.
Reflecting a recalibration of Fed rate cut expectations, market swap prices for a March rate cut fell slightly to around 65%, from 80% on Friday.
Mixed data on China
Data released earlier Wednesday showed China’s gross domestic product grew 5.2% last year, matching the rate economists expected and exceeding Beijing’s official target of “about 5 %”. The latest figures for December continued to fuel concerns about growth prospects: the fall in new house prices accelerated last month, while retail sales grew more slowly than expected.
At the same time, a Chinese economy-wide measure of prices marked its longest decline since 1999.
“This is the deepest and longest deflation in China since the 1998 Asian financial crisis,” said Robin Xing, chief China economist at Morgan Stanley. “The longer deflation lasts, the more political stimulus is necessary. »
In the commodities sector, oil fell as drag from a stronger U.S. dollar and broader risk aversion offset concerns over escalating tensions in the Middle East, including continued attacks on ships in the Red Sea by Iran-backed Houthi rebels.
Earlier, the greenback posted its biggest gain in 10 months on shifting yields, as expectations for a quick rate cut by the Fed this year waned.
In the United States, Morgan Stanley’s profits fell on a warning about lower wealth margins, while Goldman Sachs Group Inc. rose as profits topped estimates. Boeing Co. sank following analyst downgrade. Apple Inc. slipped when the U.S. Supreme Court refused to consider its appeal in an antitrust suit challenging the App Store.
Elsewhere, gold held steady after falling more than 1% on Tuesday to trade around $2,028 an ounce and Bitcoin held steady above $43,000.
Key events this week:
Eurozone CPI, Wednesday
Retail sales, industrial production and business inventories in the United States, Wednesday
Fed releases Beige Book survey on regional economic conditions on Wednesday
New York Fed President John Williams speaks Wednesday
ECB President Christine Lagarde and ECB Governing Council members Klaas Knot and Boris Vujcic speak in Davos on Wednesday.
Housing starts and jobless claims in the United States, Thursday
Republican presidential primary debate in New Hampshire on Thursday
The President of the ECB, Christine Lagarde, participates in the Davos round table on Thursday
The ECB publishes the minutes of its December policy meeting on Thursday
Atlanta Fed President Raphael Bostic speaks Thursday
Retail sales in Canada, Friday
Japan CPI, tertiary index, Friday
U.S. Existing Home Sales, University of Michigan Consumer Sentiment, Friday
ECB President Christine Lagarde and IMF Managing Director Kristalina Georgieva speak in Davos on Friday.
San Francisco Fed President Mary Daly speaks Friday
Some of the main market movements:
Actions
S&P 500 futures fell 0.5% as of 6:17 a.m. London time.
Nikkei 225 (OSE) futures fell 0.4%
S&P/ASX 200 futures fell 0.1%
Hong Kong’s Hang Seng fell 3.7%
The Shanghai Composite index fell 1.2%
Euro Stoxx 50 futures fell 1%
Currencies
The Bloomberg Dollar Spot Index rose 0.2%
The euro fell 0.2% to $1.0858
The Japanese yen fell 0.4% to 147.77 per dollar
The offshore yuan was little changed at 7.2192 per dollar.
Cryptocurrencies
Bitcoin fell 1.5% to $42,791.76
Ether fell 1.7% to $2,562.98
Obligations
The yield on 10-year Treasury bonds was little changed at 4.06%
The Japanese 10-year yield rose 1.5 basis points to 0.605%
The Australian 10-year yield rose six basis points to 4.21%
Raw materials
West Texas Intermediate crude fell 0.8% to $71.83 a barrel
Spot gold fell 0.5% to $2,018.33 an ounce
This story was produced with the help of Bloomberg Automation.
–With help from Iris Ouyang and James Mayger.
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