Asian shares mostly lower, China gains on GDP rebound

AP – Shares fell yesterday across most of Asia following a retreat on Wall Street, but benchmarks in Hong Kong and Shanghai rose after data showed the Chinese economy grew a solid 2.3 per cent in 2020.

The stronger than expected performance for the world’s second-largest economy helped counter growing wariness among investors over deepening economic devastation from the pandemic around the globe.

China was the first country to suffer outbreaks of the new coronavirus and the first major economy to begin recovering as meanwhile the United States (US), Europe and Japan are struggling with outbreaks.

The Hang Seng in Hong Kong gained 0.8 per cent to 28,810.65 while the Shanghai Composite index climbed 0.8 per cent to 3,596.22.

But gloom prevailed in other major regional markets. Tokyo’s Nikkei 225 dropped one per cent to 28,242.21 and the Kospi in South Korea lost 2.3 per cent to 3,013.93. Australia’s S&P/ASX 200 declined 0.8 per cent to 6,663.00. Shares fell in Southeast Asia and Taiwan.

US futures also were lower. Markets were closed in the US yesterday for Martin Luther King Jr day.

People stand near a bank’s electronic board showing the Hong Kong share index at Hong Kong Stock Exchange. PHOTO: AP

China’s National Bureau of Statistics said growth in the three months ending in December rose to 6.5 per cent over a year earlier, up from the previous quarter’s 4.9 per cent. The economy contracted at a 6.8 per cent pace in the first quarter of 2020 as the country fought the pandemic with shutdowns and other restrictions.

Some measures showed a slowing of activity in December, but “The big picture is still that activity remains strong, which is helping to support the labour market”, Stephen Innes of Axi said in a commentary.

On Friday, the S&P 500 fell 0.7 per cent to 3,768.25, with stocks of companies that most need a healthier economy taking some of the sharpest losses. It lost 1.5 per cent over the week.

The Dow Jones Industrial Average lost 0.6 per cent to 30,814.26, and the Nasdaq composite dropped 0.9 per cent to 12,998.50. The Russell 2000 index of small-cap stocks lost 1.5 per cent to 2,123.20. Treasury yields also dipped as reports showed shoppers held back on spending during the holidays and are feeling less confident, the latest in a litany of discouraging data on the economy.

Friday was the first chance for traders to act after President-elect Joe Biden unveiled details of a USD1.9 trillion plan to prop up the economy. He called for USD1,400 cash payments for most Americans, the extension of temporary benefits for laid-off workers and a push to get COVID-19 vaccines to more Americans.

That fit investors’ expectations for a big and bold plan, but markets had already rallied powerfully in anticipation of it.

Biden’s Democratic allies will have control of the House and Senate, but only by the slimmest of margins in the Senate. That could hinder the chances of the plan’s passage.

The urgency for providing such aid is ramping by the day. One report on Friday showed that sales at retailers sank by 0.7 per cent in December, a crucial month for the industry. The reading was much worse than the 0.1 per cent growth that economists were expecting, and it was the third straight month of weakness.

For many investors the big question is what ramped up government spending may mean for interest rates and inflation.

Treasury yields have been climbing on expectations the government will borrow much more to pay for its stimulus, in addition to improved economic growth and higher inflation. The yield on the 10-year Treasury zoomed above one per cent last week for the first time since last spring and briefly topped 1.18 per cent this week.

Higher interest rates could divert some investments away from shares and into bonds. The yield on the 10-year Treasury was steady at 1.09 per cent.

In other trading, benchmark US crude oil lost 20 cents to USD52.16 per barrel in electronic trading on the New York Mercantile Exchange. It gave up USD1.21 on Friday to USD52.36. Brent crude, the international standard, shed 28 cents to USD54.82 per barrel.

The dollar was trading at JPY103.73, down from JPY103.88 on Friday.

The euro strengthened to USD1.2084 from USD1.2078.