SYDNEY (Reuters) – Asian equities faltered on Monday as anxious investors wait to see if US gains can justify high valuations, while a bond rally could be tested by what should be very strong readings for US inflation and retail sales this week.
The largest MSCI index of Asia-Pacific equities outside Japan fell by 1.1% in the case of slow transactions. The Nikkei in Tokyo fell 0.6%, while South Korean shares were almost fixed.
The Nifty 50 index fell 2.4% as India overtook Brazil to become the country with the second highest number of COVID-19 cases.
Chinese blue chips lost 1.5% to a pile of economic figures in the country.
Shares of Alibaba Group Holding Ltd rose 16% after China fined a record 18 billion yuan ($ 2.75 billion) for the e-commerce giant. More than a third of the shares are owned by US investors and represent more than 8% of the MSCI EM index.
“Since the IPO Ant was canceled and with antitrust laws in place, the market has been expecting Alibaba to pay a price,” said Louis Tse, CEO of Wealthy Securities in Hong Kong.
“I think it’s good for the stock price now that the news has been delivered and is finally clarified.”
Nasdaq futures fell 0.3% on Monday, as did S&P 500 futures. EUROSTOXX 50 futures fell on both sides of the flat, while FTSE futures fell 0.3%.
Growth and technology stocks rebounded last week as US 10-year Treasury yields fell to 1.66% from a 14-month high of 1.776%.
Thomas Mathews, market economist at Capital Economics, doubted the bond rally would last, however.
“Given the pace of the economic recovery and the Fed’s apparent unwillingness to stand in the way of higher yields, we believe long-term yields will rise again soon,” he said.
Over the weekend, Federal Reserve Chairman Jerome Powell said the economy was about to start growing much faster, although the coronavirus remained a threat.
This week’s data should show that US inflation rose in March, while retail sales are on the rise, even with a double-digit gain. The Treasury is also set to test demand with $ 100 billion in debt offers this week.
“Rapid economic growth, supported by reopening and accommodative fiscal policy, may disproportionately benefit stock market sectors that are more sensitive to the health of the economy,” Mathews told Capital.
“And the composition of this growth will probably be more inclined towards those sectors than it could have been during a typical economic expansion.”
It is also likely to appear in profit. Banks are starting the first quarter earnings season this week, with Goldman Sachs, JPMorgan and Wells Fargo reporting on Wednesday.
Analysts expect profits for the S&P 500 to show a 25% jump from a year earlier, according to IBES Refinitive data. This would be the strongest performance for the 2018 quarter.
The withdrawal of yields was enough to see how the dollar came out of the boil last week. The last trade was 92,265 against a basket of currencies, down from a peak of 93,439.
It was flat on the yen at 109.60 and briefly peaked in March at 110.96. The euro remained at $ 1.1889 and above its recent value of $ 1.1702.
Gold prices remained at $ 1,737 an ounce after failing to sustain a $ 1,758 high last week. [GOL/]
Oil prices fell by about 2% last week as production rose and the renewal of COVID-19 blockades in some countries offset optimism about a recovery in fuel demand. [O/R]
Brent was quoted 3 cents a month at $ 62.98 a barrel, while US crude was flat at $ 59.32.
Editing by Shri Navaratnam and Ana Nicolaci da Costa