The MSCI Asia Pacific Index snapped a three-day winning streak as investors largely shrugged off the news that China’s economy had expanded at its fastest pace in six quarters. The country’s benchmark CSI 300 Index fluctuated after the data release, then rose into the midday break. Shares in South Korea, Australia and Japan declined.
China’s economy hit the government’s 5% growth goal last year after an 11th-hour stimulus blitz and export boom turbocharged activity, although looming US tariffs threaten to take away a key driver of expansion.
“The biggest bright spot in the economy last year was exports, which was very strong especially if price factor was excluded,” said Jacqueline Rong, chief China economist at BNP Paribas SA. “That means the biggest problem this year will be US tariffs.”
The downward moves in Asian stocks came after a widespread rally earlier this week, fueled by bets that Federal Reserve interest rate cuts may come sooner than previously expected. Investors were also on edge ahead of a meeting of Japan’s central bank next week, with traders betting that a rate hike is almost certain.
China’s better-than-expected economic growth “signals that the stimulus measures of 2024 are having an impact,” said Charu Chanana, chief investment strategist at Saxo Markets. “But that doesn’t rule out that China markets still face structural headwinds as well as tariffs risks, and the response to those will be the ultimate driver of long-term returns.”
The latest economic data suggests Beijing’s policy pivot since late September helped counter headwinds from a years-long property slump and entrenched deflation. It has vowed further monetary easing and stronger public spending this year, as the economy braces for Donald Trump’s return to the White House. Property investment contracted 10.6% in 2024, booking its worst year since records began in 1987.
Adding to uncertainty around Chinese assets on Friday, China Vanke Co. slid to record lows in credit markets amid questions on the latest status of its top executive and a local news report that the property developer may be seized by state authorities.
The yen held its more than 1% gain against the greenback this week amid speculation the Bank of Japan may hike its key rate next week. Overnight index swaps on Friday showed as much as a 99% chance of a move by the BOJ at its Jan. 23-24 meeting, climbing from 71% on Wednesday.
Nintendo Co. shares slumped the most in more than three months after a glimpse of its next-generation Switch 2 console appeared similar in concept and design to the current model. Rio Tinto Group slipped in Australia following a report it has held early-stage talks on combining its business with Glencore Plc.
Treasuries Gain
Treasuries were little changed after rising Thursday as Federal Reserve Governor Christopher Waller told CNBC that officials could lower rates again in the first half of 2025 if inflation data continue to be favorable. He also wouldn’t entirely rule out a cut in March. Swap trading implied a little bit more easing this year. In currencies, the dollar was steady.
“The December US inflation print was just what the doctor ordered to cure markets of their recent FOMC fear frenzy,” said Damian McIntyre, a multi-asset portfolio manager at Federated Hermes. “We expect to see inflation continue to fall on a year-over-year basis in the first few months of 2025.”
Elsewhere, the market volatility over the second half of last year as helped buoy earnings at Wall Street’s investment banks. Morgan Stanley’s fourth-quarter profit more than doubled, driven by a boost to trading revenue. Bank of America Corp’s profit beat estimates as investment banking fees hit the highest in three years.
As traders waded through the start of the US corporate earnings season, Thursday’s US economic data was mixed. Homebuilders grew less upbeat about sales prospects, while retail sales figures pointed to a consumer that held up well in the holiday season.
“In the coming weeks, the fourth-quarter earnings season will provide investors with an opportunity to shift some attention from macro to micro data,” said David Lefkowitz at UBS Global Wealth Management. “We continue to have an attractive view on US equities.”
In commodities, oil headed for a fourth straight weekly gain ahead of President-elect Donald Trump’s second term, with traders seeking clarity on far-reaching sanctions and trade policies.. Brent crude rose toward $82 a barrel, up about 2% this week, while West Texas Intermediate was near $79. Gold is set for a third straight week of advances.
Key events this week:
Eurozone CPI, Friday
US housing starts, industrial production, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.2% as of 1:42 p.m. Tokyo time
Nikkei 225 futures (OSE) fell 0.8%
Japan’s Topix fell 0.5%
Australia’s S&P/ASX 200 fell 0.2%
Hong Kong’s Hang Seng rose 0.2%
The Shanghai Composite rose 0.4%
Euro Stoxx 50 futures rose 0.1%
Nasdaq 100 futures rose 0.2%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0294
The Japanese yen fell 0.2% to 155.43 per dollar
The offshore yuan was little changed at 7.3421 per dollar
The Australian dollar fell 0.2% to $0.6200
Cryptocurrencies
Bitcoin rose 1% to $101,126.39
Ether rose 1.3% to $3,362.28
Bonds
The yield on 10-year Treasuries was little changed at 4.61%
Australia’s 10-year yield was little changed at 4.49%
Commodities
West Texas Intermediate crude rose 0.8% to $79.30 a barrel
Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
