Posted by Wayne Cole
SYDNEY (Reuters) – Asian equity markets pulled back from their highs on Monday as disappointing news about US consumer spending dampened risk sentiment before closely monitoring the health of the Chinese economy.
Also evident were doubts about how much of President-elect Joe Biden's stimulus package will come from Congress in the face of Republican opposition, and the risk of more mob violence upon his inauguration on Wednesday.
MSCI's broadest index for stocks in the Asia-Pacific region outside of Japan fell 0.3% after hitting a series of record highs in recent weeks. slipped 1% and away from a 30-year high.
E-mini futures for the down 0.3%, despite Wall Street remaining closed on Monday for a holiday.
China's GDP data is expected to show growth from 4.9% in the third quarter to 6.1% in the final quarter. The monthly figures for retail sales and industrial production should show brisk activity towards the end of the year.
"We expect China's GDP growth to accelerate to an above-average 6.5% per year in the fourth quarter due to robust industrial production, recovery in services and strong exports," said Joseph Capurso, head of international Economy at CBA.
"The data will confirm that the Chinese economy ended the year on strong foundations."
This would be in stark contrast to the US and Europe, where the spread of coronavirus has hurt consumer spending, underscored by dismal retail sales in the US reported on Friday.
"The data calls into question the durability of the recent rise in bond yields and the rise in inflation compensation," ANZ analysts said in a note.
"There is a lot of good news about vaccines and stock incentives, but optimism is being challenged by the reality of the tough months ahead," they warned. "The risk across Europe is that lockdowns will be extended and US cases could spike with the spread of the UK variant of COVID."
That will put the focus on the profit forecast from this week's company results, which BofA, Morgan Stanley (NYSE :), Goldman Sachs (NYSE 🙂 and Netflix (NASDAQ :).
Bad US data helped Treasuries offset some of their recent heavy losses and 10-year yields stood at 1.087%, compared to last week's high of 1.187%.
The more sober sentiment, in turn, boosted the US dollar as a safe haven and brought a bearish market down. Speculators increased their net short dollar position to its largest level since May 2011 in the week ending January 12th.
Price rallied properly to 90.837, off its last 2 1/2 year low at 89.206.
The euro had retreated from its January high of $ 1.2349 to $ 1.2068 while the dollar remained stable against the yen at 103.93, well above its recent low of $ 102.57.
Biden's election for Treasury Secretary Janet Yellen is likely to rule out pursuit of a weaker dollar when she testifies on Capital Hill Tuesday, the Wall Street Journal reported.
The price of gold was undermined by the dollar's rebound, leaving the metal at $ 1,812 an ounce, compared to its January high of $ 1,959.
Oil prices were profit-taking on worries as the spread of ever tighter lockdowns hurt global demand.
Futures were down 12 cents to $ 54.98 a barrel while they were down 11 cents to $ 52.25.