(Bloomberg) -- Asian stocks look set to slip after US shares struggled to gain traction as traders prepared for a swath of Chinese data scheduled for release Friday including fourth quarter growth.
Equity futures in both Japan and Hong Kong pointed to losses at the open, while those in Australia were little changed. The S&P 500 fell 0.2%. The Nasdaq 100 lost 0.7%, while a gauge of the “Magnificent Seven” megacaps slipped 1.9%.
The staid start in Asia comes as a global risk rally this week was sparked by traders re-adjusting Federal Reserve interest rate cut bets following Wednesday’s benign inflation data. A gauge of global stocks climbed 1.8% this week, its best weekly performance in two months.
“Investors are hitting the pause button following yesterday’s momentous rally,” said Jose Torres at Interactive Brokers.
Focus will now shift to a flood of Chinese data including retail sales and fourth quarter growth that is likely to show the world’s second largest economy failed to break a deflationary cycle last year. While growth is still expected to have expanded at a faster clip in real terms in the final quarter, the gross domestic product deflator — the broadest measure of price changes in an economy — will reach minus 0.2% in 2025, according to the median forecast of 15 analysts polled by Bloomberg.
While the data may be enough for authorities to say they met their around 5% economic growth target, “we expect the data to show that the Chinese economy remains soft,” Kristina Clifton, a senior economist and currency strategist at Commonwealth Bank of Australia wrote. That “will likely reinforce expectations of policy support, keeping downward pressure on Chinese interest rates and CNH.”
Elsewhere in currencies, the dollar hovered near two-year highs as markets kept a close eye on comments from Treasury secretary nominee Scott Bessent, who said the US faces an economic crisis if the 2017 Republican tax cuts aren’t extended. Meanwhile, the yen rallied 0.8% against the greenback amid speculation the Bank of Japan could hike its key rate next week.
Treasuries Gain
Treasuries rose 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. Australian bonds edged higher in early trading.
“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.”
As traders waded through corporate earnings, Thursday’s economic data was mixed. US 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.”
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