(Bloomberg) — Chinese stocks look set to face a reality check amid signs the initial optimism over rescue measures that prompted the biggest rally in more than a year is fading. US shares rose on speculation over a soft landing as the economy remains resilient
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Futures for equities in Hong Kong fell, while a gauge of US-listed Chinese companies slipped amid declines for Baidu Inc., Yum China Holdings Inc. and Alibaba Group Holding Ltd.
The pullback comes after the biggest three-day rally in Hong Kong and China equities since 2022, on bets the latest efforts from Beijing will support the economy and backstop stock markets. New York-based consulting and advisory firm Teneo cast doubt on the likelihood of a “big bang” rescue package for equities.
Elsewhere, contracts fell for shares in Japan and US futures slipped in early Asia trading. Markets in Australia and India are closed for holidays.
Wall Street traders pushed stocks to another all-time high in a sixth straight day of gains as the latest US gross domestic product data defied forecasts for a recession, bolstering the outlook for Corporate America. A closely watched measure of underlying inflation was in line with the Federal Reserve’s 2% target, seen by many as an encouraging signal.
“There are no recession concerns here, and to make matters even better, we don’t see any accompanying blowout growth in prices that are used in the GDP calculation,” said Charles Hepworth, investment director at GAM Investments. “Stronger growth without inflation is what everyone wants.”
The S&P 500 closed near 4,900 and US 10-year yields slid 6 basis points to 4.12%. Swap contracts continued to fully price in a Fed reduction in May, while boosting bets on total cuts this year to around 140 basis points.
The US economy’s fourth-quarter growth trounced forecasts as cooling inflation fueled consumer spending, capping a surprisingly strong year. Gross domestic product increased at a 3.3% annualized rate. A closely watched measure of underlying inflation rose 2% for a second straight quarter.
The market’s resilience suggests that investors are satisfied to see firm US data despite elevated rates, according to Fawad Razaqzada at City Index and Forex.com. They are confident that peak rates have been reached, and policy will eventually loosen — albeit a bit later than initially expected, he added.
The S&P 500 is at all-time highs amid a dizzying stretch for equities, triggered by falling inflation and the possibility that the Fed will cut rates in 2024. It has already blown past the Wall Street consensus over where the index will finish the year. On Wednesday, the gauge surpassed 4,867, the average level where forecasters in a Bloomberg survey pegged it 11 months from now.
With the US stock market at a record, the question for many investors right now is how much firepower is left in the rally that began last year. Whenever the S&P 500 has climbed from a bear market to new heights, returns in the subsequent six and 12 months have been handily above average, Bloomberg Intelligence data going back to 1950 showed.
BI’s analysis of market performance after the US stock benchmark hit a fresh high found the median forward six-month return was roughly 9.2%, above the median 6.3% return for all half-year periods going back more than 70 years. The same pattern is seen in forward 12-month performance, with median returns at 15% after a new all-time high versus just 13% in overlapping yearlong time frames.
Elsewhere, oil rose to the highest in about two months as US inventories, Chinese stimulus and an attack on a Russian refinery ignited a rush of trend-following algorithmic buying.
Corporate Highlights:
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Alphabet Inc., Amazon.com Inc. and Microsoft Corp. must provide information to the US Federal Trade Commission on their investments and partnerships with artificial intelligence startups Anthropic PBC and OpenAI Inc. as part of an agency study announced Thursday.
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Apple Inc. is embarking on a historic overhaul of its iOS, Safari and App Store offerings in the European Union, aiming to placate regulators set to impose tough new antitrust rules.
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Intel Corp. tumbled in late trading after giving a disappointing forecast for the current period, signaling that it continues to struggle to defend its once-dominant position in data center chips.
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Microsoft Corp. will lay off 1,900 people across its video-game divisions including at Activision Blizzard, which it purchased for $69 billion in an acquisition that closed late last year.
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The chorus of Boeing Co. critics grew louder as more top airline executives called out the planemaker over a series of quality lapses that have grounded aircraft and upended the operations of numerous carriers.
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T-Mobile US Inc. reported gains in mobile subscribers in the fourth quarter, joining rivals in finding new customers in the saturated and competitive wireless market.
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American Airlines Group Inc. expects profit this year to beat Wall Street’s estimates as it benefits from strength in demand for international flights and improved operating performance.
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LVMH sales rose at the end of last year as wealthy shoppers treated themselves to the group’s pricey handbags and Champagne, a sign of resilience at the world’s largest luxury conglomerate.
Key events this week:
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Bank of Japan issues minutes of policy meeting, Friday
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US personal income/spending, PCE deflator, pending home sales, Friday
Some of the main moves in markets:
Stocks
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Hang Seng futures fell 0.6% as of 8:39 a.m. Tokyo time
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Nikkei 225 futures fell 0.5%
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S&P 500 futures fell 0.2%. The S&P 500 rose 0.5%.
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Nasdaq 100 futures fell 0.2%. The Nasdaq 100 rose 0.1%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0844
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The Japanese yen was little changed at 147.62 per dollar
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The offshore yuan was little changed at 7.1810 per dollar
Cryptocurrencies
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Bitcoin was little changed at $39,906.07
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Ether was little changed at $2,217.56
Bonds
Commodities
This story was produced with the assistance of Bloomberg Automation
–With assistance from Rita Nazareth and Jacob Gu.
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