Asian stocks swung between gains and losses as traders assessed the latest economic developments in China and watched South Korea's plan to boost corporate value.
Shares in Hong Kong and mainland China fell, erasing earlier gains, as concerns about China took center stage after Moody’s Investors Service downgraded the credit ratings of 11 Chinese companies on Friday, an extraordinary downturn that also highlighted the fallout from record defaults.
Chinese economic stimulus
Investors are now watching China’s next move to see if the government will roll out more stimulus measures after President Xi Jinping called on Friday to boost sales of traditional consumer goods including cars and home appliances. Expectations of a fresh stimulus package have also been boosted by weak borrowing by local governments in China, raising speculation that Beijing could step in to offset the recession as it takes on more debt.
In a related development, South Korean stocks pared losses after falling about 1.4% due to the authorities’ plan to push listed companies to improve management and governance, and some investors feel that this plan is not well-defined in detail.
“The reason for the disappointment over this plan is that companies are not required to take any short-term measures, while investors expected specific incentives to be announced today,” said Seol Young-jin, an analyst at SK Securities. “The government has delayed revealing these details until later this year.”
For the United States, US stock futures fell after the S&P 500 index halted its rally at the end of last week, pressured by earnings reports in major technology stocks.
Currency and Bond Performance
The New Zealand dollar fell against all G10 currencies as traders took into account the country's monetary policy outlook, while the US dollar rose significantly.
For bonds, Treasuries extended gains in Asia, with Australian 10-year yields down nine basis points.
Investors are bracing for a big issuance of Treasuries, corporate bonds and equity securities later this month. There’s also a slew of economic data to watch, including the so-called core personal consumption expenditures price index, the Fed’s preferred inflation gauge, due out on Thursday.
The economy is headed in the right direction, New York Federal Reserve President John Williams said in an interview published Friday, and a decision to cut interest rates is likely later this year. A slew of Fed officials are likely to make similar comments to Williams’s this week, stressing that the Fed doesn’t have to start cutting rates anytime soon.
“The week ahead could be a rollercoaster ride,” Bob Savage, head of market strategy and economic forecasting at Bank of New York Mellon, wrote in a note to clients. “March begins with global concerns about persistent inflation, questions about central bankers’ indecision about raising interest rates, and concerns about larger conflicts that could further disrupt global trade.”
Elsewhere, oil prices continued to retreat after a weekly decline, as traders await a fresh set of indicators on global crude demand and supplies in March and beyond. Gold also eased slightly.
