Asia: Stocks Mixed Over Disappointing China Data

Published February 3rd, 2021 - 02:00 GMT
Asia: Stocks Mixed Over Disappointing China Data
Japan’s Nikkei 225 gained 0.67% and South Korea’s KOSPI was up 0.43%. (Shutterstock)

Asia Pacific stocks were mixed on Wednesday morning. The previous week’s retail trading that fueled volatility in heavily shorted shares stabilized, companies reported better-than-estimated revenue and progress was made in passing more U.S. stimulus measures, which all helped boost sentiment. However, this was damped by disappointing data from China.

China’s Shanghai Composite was down 0.28% by 9:36 PM ET (2:36 AM GMT) and the Shenzhen Component was down 0.27%.

January’s Caixin services Purchasing Managers Index (PMI), released earlier in the day, was 52, against December’s 56.3. The release follows disappointing economic data released earlier in the week suggesting a slowdown in the Chinese economic recovery. The Caixin manufacturing PMI was 51.5, the manufacturing PMI at 51.3 and the non-manufacturing PMI at 52.4 respectively.

Hong Kong’s Hang Seng Index fell 0.61%.

Japan’s Nikkei 225 gained 0.67% and South Korea’s KOSPI was up 0.43%.

In Australia, the ASX 200 jumped 1.10%.

U.S. shares rose after Alphabet (NASDAQ:GOOGL) Inc. (NASDAQ:GOOG) and Inc. (NASDAQ:AMZN) reported better-than-estimated revenue. Amazon CEO Jeff Bezos will also step down from the role in the third quarter of 2021 and will be replaced by Andy Jassy, currently the CEO at Amazon Web Services.

The collapse in Reddit speculative trades that saw shares in GameStop Corp . (NYSE:GME) and AMC Entertainment Holdings Inc. (NYSE:AMC) fall sharply also gave shares a boost.

"The fact that markets have cooled down a bit with the retail-trading frenzy, that’s giving a little bit of optimism. Anytime there’s more stability to markets, there’s a breath of relief of all investors,” Verdence Capital Advisors director of portfolio strategy Megan Horneman told Bloomberg.

“Wallstreetbets is hitting the point of diminishing value … retail traders will still be a force to be reckoned with, but we are perhaps past the peak you-only-live-once world with the cat out of the bag,” AxiCorp Financial Services Chief Global Markets Strategist Stephen Innes told Reuters.

Treasury yields edged higher as progress was made towards further U.S. stimulus measures. The Senate began debating a budget resolution for the 2021 fiscal year on Tuesday. The debate is the first step towards passing a $1.9 trillion stimulus package proposed by President Joe Biden via a simple majority, rather than the 60-vote threshold required for most legislation.

All this increased optimism about a global economic recovery from COVID-19 in 2021.

“All the ingredients for a rapid recovery from the second quarter onwards are getting sweetly baked into the reopening party cake,” said AxiCorp’s Innes.

However, other investors struck a more cautious note. Bank of America Corp (NYSE:BAC). analysts issued a warning about rising bullishness, saying that a sentiment indicator is close to hitting a “sell” signal. Citigroup Inc (NYSE:C) analysts expressed concerned over elevated earnings expectations, noting that share prices may be ahead of themselves by about 10%.

The Bank of England will hand down its policy decision on Thursday. The U.S. payrolls report for January, including non-farm payrolls, will be released on Friday.

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