Stockmarkets in most parts of the world were weaker on Monday as investors worried that inflation might remain stickier than hoped and China’s growth slowdown might turn out more abruptly than markets now believe. Chinese markets opened for the first time since the New Year break and tentatively rose, while US markets were shut for the holiday.
Technology stocks have led to recent gains, but the sector is vulnerable ahead of earnings from Nvidia. As of midday, MSCI’s world index increased, and Europe’s broader regional benchmark has changed little.
Then again, James Rossiter, global macro strategy head at TD Securities, said: “The mixed economic data released lately has put us in a transition period, and we are waiting for the data to tell a consistent story.”
And they are supported by the two reports this month on the US consumer price index (CPI) and producer prices that increased more than expected – and falling retail sales – which point the finger, angrily, at inflation. The jobs data is strongly positive; hundreds of thousands of jobs are created, and strong wage growth completely offsets all these negatives.
In far-off Asia, a holiday in Japan kept the Nikkei flat. At the same time, a follow-on day of weakness after US names with chip-related exposure punished stocks yesterday prompted the region to go lower, with Chinese blue chips providing excellent strength thanks to exuberant holidaying tourists.
Meanwhile, in the face of the Chinese central bank’s recent rate refusal to ease from the one-year high of 5.6 percent, some analysts believe there’s still more policy room for economic stimulus, as deflationary risks are growing.
Source: Nell Mackenzie and Wayne Cole,Reuters February 19, 2024
