Global shares climb on China’s economic recovery, with earnings in focus

Data out yesterday had confirmed the world’s second-largest economy was one of the few to grow over 2020 and actually picked up speed as the year closed. — Reuters pic
Data out yesterday had confirmed the world’s second-largest economy was one of the few to grow over 2020 and actually picked up speed as the year closed. — Reuters pic

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SYDNEY, Jan 19 — Asian shares climbed today as investors wagered China’s economic strength would help underpin growth in the region, even as pandemic lockdowns threatened to lengthen the road to recovery in the West.

Data out yesterday had confirmed the world’s second-largest economy was one of the few to grow over 2020 and actually picked up speed as the year closed.

European markets appeared set for a higher open with Euro Stoxx 50 futures up 0.5 per cent and London’s FTSE gaining 0.4 per cent. Those of Germany’s DAX rose 0.64 per cent.

MSCI’s broadest index of Asia-Pacific shares outside Japan firmed 1.61 per cent, to be a whisker from record highs.

Japan’s Nikkei bounced 1.53 per cent, recovering all the losses suffered yesterday when caution had dominated markets.

Australian shares climbed 1.19 per cent as investors bet on news that Queensland state was set to lift virus-led restrictions and on prospects of better production numbers from local miners.

Chinese blue-chips dipped 1.47 per cent, while Hong Kong’s Hang Seng advanced 2.1 per cent, helped by steady and robust demand from investors in mainland China for shares in the Asian financial hub.

Mainland investors purchased 18.9 billion yuan (US$2.91 billion) worth of Hong Kong stocks today via the Stock Connect linking mainland and Hong Kong, after spending a record HK$23 billion yesterday, according to HKEX and Refinitiv data.

On Wall Street, US stocks also looked a little steadier as futures for the S&P 500 added 0.67 per cent and NASDAQ futures 0.97 per cent.

Analysts at JPMorgan felt the coming earnings season could brighten the mood given the consensus in Europe was for a fall of 25 per cent year-on-year, setting a very low bar.

“The projected EPS growth in Europe now stands at the lows of the crisis which seems too conservative, and could likely lead to positive surprises over the reporting season,” they wrote in a note.

The same could be true for the United States where results from BofA, Morgan Stanley, Goldman Sachs and Netflix are due this week.

For now, dealers were cautious ahead of US President-elect Joe Biden’s inauguration given the risk of more mob violence, along with doubts about how much of his fiscal stimulus package will pass Republican opposition in Congress.

Janet Yellen, Biden’s nominee to run the Treasury Department, will tell the Senate Finance Committee today that the government must “act big” with the coronavirus relief plan.

“Biden will not want the risk of a double-dip recession to escalate,” said analysts at ANZ in a note.

The full US$1.9 trillion (RM7.7 trillion) proposal combined with stimulus already agreed would amount to 10 per cent of GDP.

“That would be sufficient to close any output gap and underpin a gradual recovery in inflation as demand firms,” they wrote. “But it will be a difficult winter, and investors will need renewed confidence in the inflation trade before established earlier trends reassert themselves.”

Wall Street is also bracing for tougher regulations now that the Democrats control the Senate, with Biden set to nominate two consumer champions to top financial agencies.

In bond markets, 10-year Treasury yields were steady at 1.11 per cent and off their recent 10-month high of 1.187 per cent as investors waited to see how much fiscal stimulus might actually get passed.

Currencies were also quiet with the dollar index last at 90.764, comfortably above its recent trough of 89.206.

The euro idled at US$1.2093, after touching a six-week low of US$1.2052 overnight, while the dollar was sidelined on the safe-haven yen at 104.02.

The Canadian dollar eased to US$1.2729 on reports Biden would cancel a permit for the Keystone XL pipeline as one of his first acts in office.

Gold steadied at US$1,838 an ounce after briefly reaching a six-week low of US$1,809.90 overnight.

Global demand concerns kept oil prices in check. US crude fell 0.19 per cent to US$52.26 a barrel, while Brent crude futures rose 0.44 per cent to US$54.99 a barrel. — Reuters

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