January 17, 2024 (MLN): Chinese shares led declines in most Asian markets, following mixed signals on the world’s number two economy and as investors trimmed wagers for Federal Reserve interest rate cuts, as Bloomberg reported.
Hong Kong’s Hang Seng Index dropped 2.8% while the CSI 300 mainland Chinese benchmark lost 0.7%.
The losses came after data showed while China reached its 2023 economic goal, the country’s housing slump has worsened and domestic demand remained listless.
Equities also fell from South Korea to Australia, with a regional gauge down nearly 1%. Japan was an exception, aided by a weaker yen.
US stock futures also slid, while Treasuries were steady and the dollar gained.
“China’s nominal GDP growth in 2023 is lower than the real GDP growth, due to the deflationary pressure. Labor market is weak,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management Co.
“This suggests China is likely growing below its potential growth.”
The weaker tone in Asia came after the S&P 500 lost 0.4% and Treasuries fell Tuesday, with yields on the 10-year note rising around 12 basis points.
The moves followed comments from Fed Governor Christopher Waller, who urged caution but said a rate cut this year was possible if inflation edges lower toward the central bank’s target.
When the time is right, rates should be lowered “methodically and carefully,” Waller said during a virtual event on Tuesday.
“We view his comments emphasizing no need to rush as indicating that he does not expect to push for a March cut,” said Krishna Guha, vice chairman at Evercore ISI.
The comments were “consistent with our baseline of a first cut in May or June,” Guha said.
Reflecting a recalibration of Fed rate cut expectations, swaps market pricing for a rate cut in March inched lower to around 65% from 80% on Friday.
