Asian stocks fall as China profit growth slows: Markets wrap

Asian stocks swung to a loss and US equity futures fell as slowing Chinese industrial profit growth sapped optimism after last week’s equity rally. The yen strengthened against all its Group-of-10 peers.

China shares led declines as data showed profits at the nation’s industrial companies climbed at a slower pace, suggesting the economic recovery remains uncertain. The Hang Seng China Enterprises Index dropped as much as 1.4% while CSI 300 Index closed 1.2% lower in Monday’s morning session. Benchmarks also fell in Australia and Japan.

Equities trimmed some of last week’s gains amid uncertainty before the next installment of key global economic data this week including euro-zone inflation data, China PMIs and US personal consumption numbers on Thursday, and US, European and Chinese PMIs on Friday. Asian markets had little direction from the US following the holiday shortened post-Thanksgiving session Friday.

“We’ve seen US bond yields gap higher at the open, and that has weighed on equity market sentiment to send US futures down alongside Chinese markets that are already under pressure from weak industrial profits,” said Matt Simpson, a senior market strategist at City Index Inc.

US stock futures dropped in Asia after the S&P 500 capped a fourth week of gains Friday, when the VIX — Wall Street’s “fear gauge” and a measure of equity volatility — fell to its lowest level since January 2020.

The subdued growth at Chinese industrial companies will likely keep firms cautious about expanding or hiring more, which in turn could add more pressure on prices. Profits increased just 2.7% in October from a year ago, down from September’s 11.9% gain.

“The profit numbers show that current recovery momentum is still fairly fragile,” Dong Chen, head of Asia macroeconomic research at Pictet Wealth Management, said in an interview with Bloomberg Television. “We still have a long way to go to get out of the woods.”

This week, investors will be looking especially closely at Chinese activity data to gauge the health of the world’s second largest economy. Traders will be assessing shadow banking stocks after Chinese authorities said they recently opened criminal investigations into the money management business of Zhongzhi Enterprise Group.

In Hong Kong, the one-month interbank offered rate jumped to the highest since 2007 as the supply of cash tightened toward year-end.

‘Remain heavy’

Treasury 10-year yields climbed as much as five basis points to 4.51%, the highest in more than a week.

The dollar was mixed in Asian trade after Bloomberg’s index of the greenback slipped 0.5% last week.

The US currency may “remain heavy” for most of the week as fund managers adjust hedges and cash heads into developing economies, Commonwealth Bank of Australia strategists including Joseph Capurso wrote in a note to clients. “The backdrop of low volatility and expectations for a soft landing in the US economy supports portfolio capital flows into emerging markets,” they said.

In earnings due this week, Crowdstrike Holdings will underscore how businesses are prioritizing cybersecurity after recent high-profile corporate hacks, while Salesforce and Dell Technologies Inc. are expected to post slower sales growth as overall corporate expenditure tightens.

Traders will also be keeping an eye on gold and oil after Israel and Hamas signaled that a temporary cease-fire in Gaza could be extended beyond Monday to allow for the release of more hostages and prisoners. Oil fell for a fourth day as traders looked ahead to this week’s delayed OPEC+ meeting and wider financial markets carried a risk-off tone.

Key events this week:

European Central Bank President Christine Lagarde appears in parliamentary committee, Monday
Australia retail sales, Tuesday
NATO foreign ministers meet, Tuesday
US Conf. Board consumer confidence, Tuesday
Fed Governor Chris Waller, Chicago Fed President Austan Goolsbee speak at different events, Tuesday
Australia CPI, Wednesday
Reserve Bank of New Zealand policy decision, Wednesday
Eurozone economic confidence, consumer confidence, Wednesday
Bank of England Governor Andrew Bailey speaks, Wednesday
US wholesale inventories, GDP, Wednesday
Fed releases its Beige Book of regional economic activity, Wednesday
Cleveland Fed President Loretta Mester speaks, Wednesday
China non-manufacturing and manufacturing PMIs, Thursday
Eurozone CPI, Thursday
US PCE deflator, Thursday
OPEC+ meeting, focused on finalizing output levels for 2024, Thursday
China Caixin manufacturing PMI, Friday
Eurozone manufacturing PMI, Friday
UK S&P Global/CIPS Manufacturing PMI, Friday
US construction spending, ISM Manufacturing, light vehicle sales, Friday
Fed Chair Jerome Powell, Chicago Fed President Austan Goolsbee speak at separate events, Friday

Some key moves in markets:

Stocks

S&P 500 futures fell 0.3% as of 1:59 p.m. Tokyo time. The S&P 500 was little changed on Friday
Nasdaq 100 futures fell 0.5%. The Nasdaq 100 fell 0.1%
Japan’s Topix fell 0.3%
Australia’s S&P/ASX 200 fell 0.7%
Hong Kong’s Hang Seng fell 1%
The Shanghai Composite fell 0.8%
Euro Stoxx 50 futures fell 0.4%