Asia shares pare losses as China GDP pips forecasts

Hong Kong's Hang Seng rose 0.6 per cent.
Hong Kong's Hang Seng rose 0.6 per cent.PHOTO: REUTERS

SYDNEY (REUTERS) - Asian share markets pared early losses on Monday (Jan 18) as data confirmed China's economy had bounced back last quarter as factory output jumped, helping offset recent disappointing news on US consumer spending.

Chinese blue chips rose 0.4 per cent after the economy was reported to have grown 6.5 per cent in the fourth quarter, on a year earlier, topping forecasts of 6.1 per cent.

Industrial production for December also beat estimates, though retail sales missed the mark.

MSCI's broadest index of Asia-Pacific shares outside Japan trimmed losses and were off 0.2 per cent, having hit a string of record peaks in recent weeks. Japan's Nikkei slipped 0.8 per cent and away from a 30-year high.

Hong Kong's Hang Seng rose 0.6 per cent, while South Korea's Kospi and Australia's S&P/ASX 200 Index declined 0.8 per cent.

Singapore's Straits Times Index was down 0.7 per cent at 11.04am local time.

E-Mini futures for the S&P 500 dipped 0.3 per cent, though Wall Street will be closed on Monday for a holiday. EUROSTOXX 50 futures eased 0.2 per cent and FTSE futures 0.1 per cent.

The pick-up in China was a marked contrast to the US and Europe, where the spread of coronavirus has scarred consumer spending, underlined by dismal US retail sales reported on Friday.

Also evident are doubts about how much of US President-elect Joe Biden's stimulus package will make it through Congress given Republican opposition, and the risk of more mob violence at his inauguration on Wednesday.

"The data bring into question the durability of the recent move higher in bond yields and the rise in inflation compensation," said analysts at ANZ in a note.

"There's a lot of good news around vaccines and stimulus priced into equities, but optimism is being challenged by the reality of the tough few months ahead," they warned. "The risk across Europe is that lockdowns will be extended, and US cases could lift sharply as the UK COVID variant spreads."

That will put the focus on earnings guidance from corporate results this week, which include BofA, Morgan Stanley, Goldman Sachs and Netflix.

The poor US data helped Treasuries pare some of their recent steep losses and 10-year yields were trading at 1.087 per cent, down from last week's top of 1.187 per cent.

The more sober mood in turn boosted the safe-haven US dollar, catching a bearish market deeply short. Speculators increased their net short dollar position to the largest since May 2011 in the week ended Jan. 12.

The dollar index duly firmed to 90.786, and away from its recent 2-1/2 year trough at 89.206.

The euro had retreated to US$1.2074, from its January peak at US$1.2349, while the dollar held steady on the yen at 103.80 and well above the recent low at 102.57.

The Canadian dollar eased to US$1.2773 per dollar after Reuters reported Biden planned to revoke the permit for the Keystone XL oil pipeline.

Biden's pick for Treasury Secretary, Janet Yellen, is expected to rule out seeking a weaker dollar when testifying on Capital Hill on Tuesday, the Wall Street Journal reported.

Gold prices were undermined by the bounce in the dollar leaving the metal down at US$1,824 an ounce, compared to its January top of US$1,959.

Oil prices ran into profit-taking on worries the spread of increasingly tight lockdowns globally would hurt demand.

Brent crude futures were off 52 cents at US$54.58 a barrel, while US crude eased 46 cents to US$51.90.