China Shares Drop With Asia Peers After Poor Data: Markets Wrap

This content was published on December 16, 2024 - 06:01

5 minutes

(Bloomberg) — Chinese shares fell, weighing on broader Asian equities, after disappointing retail sales data showed the world’s second-biggest economy is still struggling to recover.

MSCI’s Asian equity gauge dropped for a second day, with benchmarks also falling in Australia and Japan. Materials and consumer discretionary stocks led regional declines, while a gauge of Asian currencies slid to a two-week low. US equity futures edged up as traders positioned for a Federal Reserve policy decision on Friday. Bitcoin climbed to a fresh record.

While China’s retail sales increased 3% from a year ago, that undershot forecasts of 5% growth by economists surveyed by Bloomberg. The nation’s stocks had already slumped on Friday amid disappointment after Beijing pledged to boost consumption but failed to offer details on fiscal stimulus.

The retail-sales data “is a reflection of the dire situation there and how the stimulus efforts have prioritized optics over delivering meaningful economic improvements,” said Charu Chanana, chief investment strategist at Saxo Markets in Singapore. “Even for a tactical recovery, we need more after a series of false starts and the risk of tariffs ahead.”

Korean stocks swung to a loss after opening higher following the impeachment of President Yoon Suk Yeol on Saturday. The leader of the ruling party Han Dong-hoon said he’s stepping down following mounting calls for his resignation, after the president was impeached for his brief martial-law decree.

“The rapid impeachment vote removes near-term uncertainty and could provide short-term relief to sentiment,” Kathleen Oh, an economist at Morgan Stanley, wrote in a note to clients. If events proceed swiftly toward fresh elections “we see limited impact on the real economy although downside risk remains if uncertainty persists longer than the previous cases of two-to-three months,” she said.

The negative tone in Asian markets came as investors readied themselves for the final full week of trading this year with a series of central bank meetings including the Fed, Bank of Japan and Bank of England. Traders may begin to take profit on this year’s almost 20% rally in global stocks.

Bloomberg’s dollar index crept lower after posting two straight weekly gains. Treasuries ticked higher as traders positioned ahead of the rate decision on Wednesday. Swaps traders are now pricing in around three quarter-point Fed rate cuts over the next 12 months. A week ago they had seen better than 50/50 odds of a fourth reduction.

Attention will soon shift to the European session after Moody’s Ratings cut France’s credit grade to Aa3 from Aa2. German Chancellor Olaf Scholz also faces a confidence vote on Monday that may trigger snap elections as it faces a declining economy and a narrowing growth potential. European equity futures were little changed, while French and German bond futures declined.

“Fiscal support to the Germany economy will require time to take shape as the formation of a new coalition government could take weeks or months,” Brown Brothers Harriman strategists led by Win Thin wrote in a note to clients. “That means the European Central Bank will have to do the heavy lifting,” they wrote.

Bitcoin rose more than 3% at one point on Monday in Asia to a record $106,493, exceeding its previous peak from Dec. 5. The advance helped to boost sentiment in the wider crypto market.

In commodities, oil edged lower, paring Friday’s gains as simmering geopolitical conflicts and the prospect of sanctions on Russia and Iran countered projections for a supply glut next year. Gold was little changed.

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