Asian stocks stumble over weak China data, US dollar heavy

A man looks at stock market monitors in Taipei on January 22, 2008. REUTERS / Nicky Loh / File Photo

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  • MSCI Asia ex-Japan falls after Wednesday’s jump
  • Strong US inflation data are not expected to change the interest rate outlook
  • China’s lending data spur expectations for easing policies
  • Dollars trade heavily under key support

SHANGHAI, Jan. 13 (Reuters) – Asian stocks were downed due to weak Chinese economic data on Thursday, although investors seemed relieved that US inflation data was not warm enough to force even faster monetary tightening of the Federal Reserve.

US consumer price inflation was at its highest in almost 40 years, data showed overnight, but it came as no surprise and kept intact expectations of the Fed’s downsizing or timeline for the first rate hike as early as March. read more

Asian equities fell in line with Chinese equities, after data showing mainland banks’ lending fell more than expected in December read more, causing the real estate and consumer sectors to fall.

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Chinese blue-chips (.CSI300) fell 1.3%, while MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) was flat after recording its biggest daily gain in a month on Wednesday. Japanese Nikkei (.N225) lost almost 1% after rising almost 2% a day earlier.

European stock futures pointed to a lukewarm opening in these markets, with the dollar swinging near a two-month low of 94.97.

“The US dollar is a countercyclical currency that declines as the world economy recovers,” Joseph Capurso, head of international economics at the Commonwealth Bank of Australia, said in a note.

Markets in Asia, where inflationary pressures have generally been more subdued in large economies, may offer attractive risk hedging opportunities, said Jim McCafferty, Nomura’s joint head of APAC stock analysis.

“If you are a global investor and you have seen very significant stock market gains in the US during 2021, if you look at inflation as a threat, many investors may be tempted to redistribute funds away from developed stock markets in the West. developed and emerging markets in East Asia, “he said.

The uneven development in Asia followed small gains on Wall Street overnight, with the S&P 500 (.SPX) rising 0.28% and the Nasdaq Composite (.IXIC) up 0.23%. The Dow Jones Industrial Average (.DJI) rose 0.11%.

While more long-term US interest rates fell after Wednesday’s inflation data, Fed fund futures are pricing in almost four rate hikes this year. Some analysts say there may still be room for a more aggressive rate hike plan.

“Our expectation of sustained cyclical price pressure means that we believe the Fed will continue to tighten policy into 2023 with more than investors currently expect,” said Jonathan Petersen, Capital Economics Market Economist in a note, adding that he expected the US 10 – annual return to reach 2.25% at year-end, and 2.75% by the end of 2023.

On Thursday, the US 10-year interest rate rose to 1.7499% after a decline on Wednesday to close at 1.725%. The policy-sensitive 2-year interest rate was up to 0.9229% from the end of Wednesday at 0.907%.

The dollar was also almost flat against the euro at $ 1.1442, after hitting the lowest level since mid-November of the previous session. Overnight, it also fell against the yen, falling through support around 115 to 114.38 yen, a low level of more than two weeks. It last bought 114.62 yen.

The oil price ticked lower, one day after reaching its highest level in almost two months due to a falling dollar, tighter supply, and as investors bet that the spread of the Omicron coronavirus variant would have a relatively limited economic impact.

Global benchmark Brent oil fell 0.07% to $ 84.61 a barrel and US West Texas Intermediate oil fell to $ 82.58 a barrel.

Spot gold remained stable at $ 1,824.54 per ounce.

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Reporting by Andrew Galbraith, additional reporting by Vidya Ranganathan in Singapore. Edited by Ana Nicolaci da Costa & Shri Navaratnam

Our standards: Thomson Reuters Trust Principles.

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