Stocks in Asia fall as Evergrande wind-up weighs: Markets wrap

Asia stocks slipped Tuesday, led by a selloff in Hong Kong equities as the liquidation of a large Chinese developer intensified concerns over the nation’s embattled real estate sector.

Stocks in Hong Kong fell around 2%, while those on the mainland were poised to decline for a third day. The impact of China Evergrande Group’s liquidation order pushed a Bloomberg index of Chinese developers down almost 4%.

“Out of the nine Chinese private property developers in our coverage which failed to repay debt, only two have successfully completed debt restructurings, which suggests the sector faces litigation risks after Evergrande was ordered to liquidate,” Kristy Hung, Bloomberg Intelligence analyst said in a note.

Mounting expectations for more policy easing in China drove the benchmark government bond yield to fall to its lowest in nearly 22 years.

Hong Kong benchmarks were also weighed by BYD after shares in the EV maker slumped after missing its earnings forecast. Elsewhere, shares in South Korea and Japan traded within tight ranges.

Treasury yields extended falls Tuesday after a cut in the quarterly borrowing estimate by the US Treasury eased concerns about the flood of debt being issued to cover the federal deficit. Futures contracts on US equities were unchanged after Wall Street climbed to fresh records.

Oil was steady as the market waited for a US response to the deadly attack on American troops in Jordan, which could risk an escalation of tensions in a region key to global crude production.

The New Zealand dollar held onto gains following hawkish comments from an official at the nation’s central bank. The greenback was little changed as traders waited for US data and the Federal Reserve’s policy decision this week.

The next few days will be crucial in the US to determine whether stock valuations — particularly those of megacap US technology companies — are sustainable given that investors are pricing in significant earnings growth expectations in anticipation of rate cuts coming sooner than Fed officials project, according to JPMorgan Chase & Co.’s Marko Kolanovic.

This week marks the busiest this season for US earnings, with results from Microsoft Corp, Alphabet Inc, Apple Inc, Amazon.com Inc and Meta Platforms. As most of the megacaps remain in record territory, there are concerns that investors are overexposed to just a handful of stocks, which could open the door for some pain if quarterly results underwhelm.

“This week could be key,” said Chris Larkin at E*Trade from Morgan Stanley. “If the market is going to sustain its latest breakout, it may need to avoid earnings disappointments from this week’s big-tech lineup, get encouraging news from the Fed on interest rates, and see jobs numbers that are solid, but not too hot.”

Investors are also on the lookout for the Federal Reserve’s rate decision and a raft of data from consumer confidence to jobs. Going into this week’s two-day Fed policy meeting, investors are assigning roughly even odds to the prospect that the central bank will start lowering borrowing costs at its next decision in March.

Key events this week:

• Eurozone economic confidence, GDP, consumer confidence, Tuesday
• US Conf. Board consumer confidence, JOLTS jobs openings, Tuesday
• Microsoft, Alphabet earnings, Tuesday
• China non-manufacturing PMI, manufacturing PMI, Wednesday
• Japan industrial production, retail sales, housing starts, Wednesday
• Bank of Japan issues summary of opinions from January policy meeting, Wednesday
• Boeing announces earnings amid US government safety probe, Wednesday
• Federal Reserve interest rate decision and Fed Chair Jerome Powell’s news conference, Wednesday
• US Treasury quarterly refunding, Wednesday
• China Caixin manufacturing PMI, Thursday
• Eurozone S&P Global Manufacturing PMI, CPI, unemployment, Thursday
• US productivity, construction spending, ISM Manufacturing, initial jobless claims, Thursday
• Apple, Amazon, Meta, Deutsche Bank, BNP Paribas earnings, Thursday
• Bank of England interest rate decision, Thursday
• US employment report, University of Michigan consumer sentiment, factory orders, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 1:54 p.m. Tokyo time. The S&P 500 rose 0.8%
• Nasdaq 100 futures were little changed. The Nasdaq 100 rose 1%
• Japan’s Topix rose 0.1%
• Australia’s S&P/ASX 200 rose 0.2%
• Hong Kong’s Hang Seng fell 1.9%
• The Shanghai Composite fell 0.6%
• Euro Stoxx 50 futures rose 0.4%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0825
• The Japanese yen was little changed at 147.39 per dollar
• The offshore yuan was little changed at 7.1889 per dollar
• The Australian dollar was little changed at $0.6607

Cryptocurrencies

• Bitcoin rose 0.6% to $43,429.21
• Ether rose 0.2% to $2,311.74

Bonds

• The yield on 10-year Treasuries declined two basis points to 4.05%
• Japan’s 10-year yield declined one basis point to 0.710%
• Australia’s 10-year yield declined seven basis points to 4.15%

Commodities

• West Texas Intermediate crude rose 0.4% to $77.06 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.