Asian shares falter from 1-1/2 month highs

Asian shares turned down on Monday as China trade data started trickling in and as investors looked to key corporate earnings later in the week to take the pulse of a cooling global economy.

Partial data on trade from China showed dollar-denominated exports growth was the highest since 2011. Markets are still awaiting numbers for December due shortly.

MSCI’s broadest index of Asia-Pacific shares outside Japan stumbled 0.7% after climbing to the highest since early December on Friday, with Chinese and Hong Kong shares the biggest losers.

Liquidity was generally expected to be light during Asian hours as Japan was on public holiday.

Chinese shares opened in the red, with the blue-chip index down 0.3% and Shanghai’s SSE Composite off 0.2%. Hong Kong’s Hang Seng index dropped 1.2% while Australian shares turned down after starting firm.

E-minis for the S&P 500 too stumbled, in an indication of risk aversion.

The trade data from China was the main focus, with recent signs Asia’s largest economy was losing momentum and the government was planning to lower its 2019 economic growth target.

The Sino-US tariff war has already disrupted trade flows for hundreds of billions of dollars worth of goods and roiled global markets. While the two countries have been in talks for months, few details have been provided of any progress made.

Investors expect volatility to rise this week, “as some key issues that have been affecting market sentiment approach decision points,” said Nick Twidale, analyst at Rakuten Securities.

“Expect sentiment to continue to dominate market direction with trades focussing closely on the news channels for the next twist in the various issues that are influencing the market.”

On the earnings front, US banks are in sharp focus with quarterly results from Citigroup due Monday followed by JPMorgan Chase, Wells Fargo, Goldman Sachs and Morgan Stanley later in the week.

Expectations are dour with profits for US companies forecast to rise 6.4%, down from an Oct. 1 estimate of 10.2% and a big drop from 2018’s tax cut-fueled gain of more than 20%.

Investor attention was also on the US government shutdown, now in its 24th day, and with no resolution in sight.

Further clouding the outlook, Britain faces a hugely uncertain path with a vote for a deal for its exit from the European Union due in the UK parliament on Tuesday.

All these factors were at play last week when the main US indices ended Friday little changed as investors reset positions ahead of key risk events.

The Australian dollar, a key gauge of global risk sentiment and a liquid proxy for the Chinese yuan, dipped 0.1% from a one-month top of $0.7235 set on Friday.

Elsewhere, the euro was subdued as it hit key technical levels following data from Italy on Friday that showed the euro zone’s third-largest economy was at risk of recession.

The single currency was last at $1.1475.

The dollar’s index, which measures the greenback against a basket of major currencies, edged 0.1% lower to 95.57 after two straight days of gains.

In commodities, oil prices extended losses from Friday as investors worried about a global slowdown.

US crude was down 19 cents at $51.4 while Brent eased 17 cents to $60.31.

Gold gained to inch towards a recent seven-month high of $1,298.42 an ounce.