Asian Stocks Drop as China Profit Growth Slows: Markets Wrap

Asian stocks swung to a loss and US and European equity futures fell as slowing Chinese industrial profit growth sapped optimism after last week’s global share-market rally, Bloomberg reported.

China shares led declines as the data added to concern about deflation in the world’s second-largest economy. The Hang Seng China Enterprises Index slipped as much as 1.4%, while the CSI 300 Index fell as much as 1.3%. The yen strengthened against all its Group-of-10 peers.

Equities also retreated amid uncertainty about the next round of key global economic data this week, including euro-zone inflation figures, China PMIs and US personal consumption numbers on Thursday, and US and euro-area PMIs on Friday. An increase in Treasury yields was also seen as luring money away from stocks.

“We’ve seen US bond yields gap higher at the open, and that has weighed on equity market sentiment to send US futures down alongside Chinese markets that are already under pressure from weak industrial profits,” said Matt Simpson, a senior market strategist at City Index Inc.

US stock futures slipped despite record-strong Black Friday online spending, and that fact the VIX, known as Wall Street’s “fear gauge,” fell last week to its lowest level since January 2020.

The subdued growth at Chinese industrial companies may keep firms cautious about expanding or hiring more, which in turn could add more pressure on prices. Profits increased just 2.7% in October from a year ago, down from September’s 11.9% gain.

Still Fragile

“The profit numbers show that current recovery momentum is still fairly fragile,” Dong Chen, head of Asia macroeconomic research at Pictet Wealth Management, said in an interview with Bloomberg Television. “We still have a long way to go to get out of the woods.”

This week, investors will be looking especially closely at Chinese activity data to gauge the health of the economy. Traders will be assessing shadow banking stocks after Chinese authorities said they recently opened criminal investigations into the money management business of Zhongzhi Enterprise Group Co.

In Hong Kong, the one-month interbank offered rate jumped to the highest since 2007 as the supply of cash tightened toward year-end.

‘Remain Heavy’

Treasury 10-year yields climbed as much as five basis points to 4.51%, the highest in more than a week.

The dollar was mixed Monday after Bloomberg’s index of the greenback slipped 0.5% last week.

The US currency may “remain heavy” for most of the week as fund managers adjust hedges and cash heads into developing economies, Commonwealth Bank of Australia strategists including Joseph Capurso wrote in a note to clients. “The backdrop of low volatility and expectations for a soft landing in the US economy supports portfolio capital flows into emerging markets,” they said.

In earnings due this week, Crowdstrike Holdings Inc. will underscore how businesses are prioritizing cybersecurity after recent high-profile corporate hacks, while Salesforce Inc. and Dell Technologies Inc. are expected to post slower sales growth as overall corporate expenditure tightens.

Traders will also be keeping an eye on gold and oil after Israel and Hamas signaled that a temporary cease-fire in Gaza could be extended beyond Monday to allow for the release of more hostages and prisoners. Oil fell for a fourth day as traders looked ahead to this week’s delayed OPEC+ meeting and wider financial markets carried a risk-off tone.