Asian Markets Rise, Chinese Stocks Struggle on Deflation Concerns
Asian markets tracked Wall Street higher on Thursday, with Japan’s Nikkei surging 1.5% and MSCI’s broadest index of Asia-Pacific shares rising 0.2%. However, Chinese stocks were battling to sustain a rally after data raised concerns about deflationary pressures in China and suggested the economic slowdown may have further to run.
Alibaba Shares Fall as Third-Quarter Revenues Miss Estimates
Shares of Alibaba fell 5.2% as its third-quarter revenues missed estimates. The disappointing performance added to concerns about the Chinese market and contributed to the volatility seen in Chinese stocks.
China’s Consumer Prices Drop, Raising Deflationary Concerns
Data released on Thursday showed that China’s consumer prices fell 0.8% in January from a year ago, the biggest drop since 2009. This decline in consumer prices raises concerns about deflationary pressures in China and highlights the need for quick and aggressive actions to avoid deflationary expectations being entrenched among consumers.
Beijing Takes Measures to Steady Markets, but Investors Remain Cautious
Beijing’s recent measures to steady the market, including the ousting of China’s securities watchdog head, have not instilled significant confidence among investors. While some see these actions as an effort to steer the ship before the Lunar New Year holiday, many believe that sustained improvement in the property sector and consumer wealth effect is needed to truly turn the market around.
Wall Street Closes at Record High, Despite Regional Bank Jitters
The S&P 500 closed at a record high, buoyed by strong earnings from Chipotle Mexican Grill and Ford Motor. However, jitters about U.S. regional banks still lingered. Despite this, markets are still pricing in an 80% probability of a rate cut as early as May.
Oil Prices Extend Gains, Supported by Falling U.S. Fuel Stocks and Middle East Tensions
Oil prices continued to climb for the third consecutive session, supported by a larger-than-expected fall in U.S. fuel stocks and tensions in the Middle East. Brent rose 0.3% to $76.46 a barrel, while U.S. crude edged up 0.3% to $74.08 per barrel.
Analyst comment
1. Asian Markets Rise, Chinese Stocks Struggle on Deflation Concerns: Negative news. Chinese stocks are struggling due to concerns about deflationary pressures, indicating a potential economic slowdown in China. The market is likely to remain volatile and uncertain.
2. Alibaba Shares Fall as Third-Quarter Revenues Miss Estimates: Negative news. Alibaba’s disappointing performance adds to concerns about the Chinese market and contributes to the volatility in Chinese stocks. Investor confidence may weaken further.
3. China’s Consumer Prices Drop, Raising Deflationary Concerns: Negative news. The decline in consumer prices raises concerns about deflationary pressures in China. Quick and aggressive actions are needed to avoid entrenched deflationary expectations among consumers.
4. Beijing Takes Measures to Steady Markets, but Investors Remain Cautious: Neutral news. While Beijing has taken measures to stabilize the market, investor confidence remains low. More sustained improvement is needed in the property sector and consumer wealth effect to truly turn the market around.
5. Wall Street Closes at Record High, Despite Regional Bank Jitters: Positive news. Despite concerns about U.S. regional banks, the S&P 500 closes at a record high, supported by strong earnings. Market sentiment is positive, with an 80% probability of a rate cut expected.
6. Oil Prices Extend Gains, Supported by Falling U.S. Fuel Stocks and Middle East Tensions: Positive news. Oil prices continue to climb due to a larger-than-expected fall in U.S. fuel stocks and tensions in the Middle East. Market sentiment is likely to remain bullish.