Stocks in Asia fall as Evergrande wind-up weighs: Markets wrap

Asia stocks slipped Tuesday, led by a selloff in Hong Kong equities as the liquidation of a large Chinese developer intensified concerns over the nation’s embattled real estate sector.

Stocks in Hong Kong fell around 2%, while those on the mainland were poised to decline for a third day. The impact of China Evergrande Group’s liquidation order pushed a Bloomberg index of Chinese developers down almost 4%.

“Out of the nine Chinese private property developers in our coverage which failed to repay debt, only two have successfully completed debt restructurings, which suggests the sector faces litigation risks after Evergrande was ordered to liquidate,” Kristy Hung, Bloomberg Intelligence analyst said in a note.

Mounting expectations for more policy easing in China drove the benchmark government bond yield to fall to its lowest in nearly 22 years.

Hong Kong benchmarks were also weighed by BYD after shares in the EV maker slumped after missing its earnings forecast. Elsewhere, shares in South Korea and Japan traded within tight ranges.

Treasury yields extended falls Tuesday after a cut in the quarterly borrowing estimate by the US Treasury eased concerns about the flood of debt being issued to cover the federal deficit. Futures contracts on US equities were unchanged after Wall Street climbed to fresh records.

Oil was steady as the market waited for a US response to the deadly attack on American troops in Jordan, which could risk an escalation of tensions in a region key to global crude production.

The New Zealand dollar held onto gains following hawkish comments from an official at the nation’s central bank. The greenback was little changed as traders waited for US data and the Federal Reserve’s policy decision this week.

The next few days will be crucial in the US to determine whether stock valuations — particularly those of megacap US technology companies — are sustainable given that investors are pricing in significant earnings growth expectations in anticipation of rate cuts coming sooner than Fed officials project, according to JPMorgan Chase & Co.’s Marko Kolanovic.

This week marks the busiest this season for US earnings, with results from Microsoft Corp, Alphabet Inc, Apple Inc, Amazon.com Inc and Meta Platforms. As most of the megacaps remain in record territory, there are concerns that investors are overexposed to just a handful of stocks, which could open the door for some pain if quarterly results underwhelm.

“This week could be key,” said Chris Larkin at E*Trade from Morgan Stanley. “If the market is going to sustain its latest breakout, it may need to avoid earnings disappointments from this week’s big-tech lineup, get encouraging news from the Fed on interest rates, and see jobs numbers that are solid, but not too hot.”

Investors are also on the lookout for the Federal Reserve’s rate decision and a raft of data from consumer confidence to jobs. Going into this week’s two-day Fed policy meeting, investors are assigning roughly even odds to the prospect that the central bank will start lowering borrowing costs at its next decision in March.

Key events this week:

Eurozone economic confidence, GDP, consumer confidence, Tuesday
US Conf. Board consumer confidence, JOLTS jobs openings, Tuesday
Microsoft, Alphabet earnings, Tuesday
China non-manufacturing PMI, manufacturing PMI, Wednesday
Japan industrial production, retail sales, housing starts, Wednesday
Bank of Japan issues summary of opinions from January policy meeting, Wednesday
Boeing announces earnings amid US government safety probe, Wednesday
Federal Reserve interest rate decision and Fed Chair Jerome Powell’s news conference, Wednesday
US Treasury quarterly refunding, Wednesday
China Caixin manufacturing PMI, Thursday
Eurozone S&P Global Manufacturing PMI, CPI, unemployment, Thursday
US productivity, construction spending, ISM Manufacturing, initial jobless claims, Thursday
Apple, Amazon, Meta, Deutsche Bank, BNP Paribas earnings, Thursday
Bank of England interest rate decision, Thursday
US employment report, University of Michigan consumer sentiment, factory orders, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 1:54 p.m. Tokyo time. The S&P 500 rose 0.8%
Nasdaq 100 futures were little changed. The Nasdaq 100 rose 1%
Japan’s Topix rose 0.1%
Australia’s S&P/ASX 200 rose 0.2%
Hong Kong’s Hang Seng fell 1.9%
The Shanghai Composite fell 0.6%
Euro Stoxx 50 futures rose 0.4%