Markets retreat as investors eye economic data

Trade of the Day: Asian stocks retreat after a firm start, Europe stocks weak; pound slides, gold rallies

Quote of the Day: “Monetary and fiscal policy will support the emerging global economic recovery in 2020,” said Karsten Junius, Chief Economist at Bank J Safra Sarasin. “Difficulties finding skilled labor explain robust income growth, which supports private demand. While central banks will maintain an easing bias, we do not expect any policy rate changes in 2020. Inflation rates should slowly but steadily increase over our forecast horizon, reflecting rising wages but also trade frictions. Political uncertainties will remain an unpredictable but not an unexpected factor of influence for financial markets throughout this year.”

Stock of the day: HEC Pharma rose as much as 23.9% on massive volumes after announcing it had won a bid in China for the centralized procurement of drugs for respiratory, bacterial and hypertension diseases. China has reported a sharp rise in a SARS-like virus with 140 cases reported so far.

Number of the Day: $13 trillion – the amount by which global stock market capitalization has risen since the September lows, according to BofA Global Research.

Tip of the Day: “Asian High Yield remains attractive, with Asian HY having strongly outperformed US HY spreads since Q3,” said Stephen Chang, PIMCO Portfolio Manager, Asia. “At about 2004 bps, the differential between Asian HY and US HY remains elevated but has compressed somewhat recently. In aggregate, Asian HY appears cheap, although we highlight that the spread level masks a two-track market, with benchmark names from repeat issuers and preferred sectors trading close to fair value, while bonds from weaker sectors (such as those with low policy support, including Chinese industrials and HY LGFVs), are trading at double-digit yields.”

Asian markets ended off highs and European shares have opened on a cautious note ahead of PMI data out of EU and the US and central bank decisions from BoJ and ECB. Investors are also keen to hear global leaders speak at the World Economic Forum at Davos, which takes place from January 21-24 in Davos-Klosters, Switzerland, amid a growing backlash against globalization and opposing views on climate change. The meeting of political and business leaders will focus this year on seven major themes including public health, environment, fairer economies, better business and technology for good.

The MSCI Asia Pacific ex-Japan index was down 0.3% but the Nikkei 225 and the S&P ASX 200, Australia’s benchmark, eked out tiny gains, edging up 0.18% and 0.22% respectively. Hong Kong’s Hang Seng index dropped 0.9% driven down by losses in property, energy and consumer cyclicals.

Oil prices surged on supply fears amid disruptions in Libya and Iraq with the Brent and US WTI crude climbing 1.1% to $59.15 a barrel. Brent futures rose 1.2% to $65.66 a barrel. US markets are shut on Monday for the Martin Luther King Jr holiday.

Earlier Asian markets had opened higher after data published on Friday showed housing starts jumped in December to a 13-year high in the United States, the world’s largest economy. Also, late on Friday, China released crude oil production data which showed output of 190 million tons in 2019, an increase of 0.8% over the previous year, reversing the continuous decline since 2016. Growth data published for the fourth quarter on Friday showed the Chinese economy had expanded by the same rate as in the previous quarter.