By Stella Qiu
SYDNEY (Reuters) – China shares fell to fresh five-year lows on Friday and posted their worst weekly drop in five years despite late-session signs of state support, while blowout earnings at Amazon and Meta buoyed European and U.S. futures ahead of labour-market data.
The Shanghai Composite closed 1.5% lower as investors remain disappointed by cautious and piecemeal government stimulus measures to shore up the shaky economy.
For the week, the index sank 6.2%, its largest such loss since October 2018. The blue-chip CSI300 fell 1.2% to 3,179 – breaching the closely watched 3,200-level and hitting a five-year low in the afternoon. [.SS]
Shares in drug research and development group WuXi AppTec went limit down in Shanghai and dropped 20% in Hong Kong as its mention in a U.S. bill aimed at restricting access to Americans’ genetic data again raised geopolitical concerns.
“The tension between the U.S. and China seems not dissipating,” said Saxo’s chief China strategist, Redmond Wong, while investors are also growing impatient at the lack of big-ticket stimulus to shore up demand and confidence.
Dealers noted late surges in volume on exchange-traded funds tracking the CSI300, which suggest “national team” or state-backed buying. But it only lifted markets from lows rather than shaking the negative mood that has deepened in recent weeks.
“(It) didn’t hold,” said Wong Kok Hoong, head of equity sales trading at Maybank. “I think Hong Kong will continue to slide ’til close too.”
Elsewhere the Nikkei rose 0.4% and Hong Kong’s Hang Seng was flat.
MSCI’s broadest index of Asia shares outside Japan rose 1.2% largely thanks to a 2.9% surge in South Korea where automaker shares were flying on chatter of a government push to nudge up undervalued stocks. [.KS]
Quarterly results from Meta Platforms and Amazon.com impressed U.S. investors, with their shares surging 15% and 7% in after-hour trading, respectively, adding a combined $280 billion in stock market value. Apple, however, fell 3% after the close on disappointing China sales.
The tech rally looked set to spill over to European markets, with EUROSTOXX 50 futures up 0.8%. Nasdaq 100 futures extended gains to be up 1% while S&P 500 futures rose 0.6%.
TREASURIES RALLY
China’s slump and the tech rally has temporarily drawn attention away from pressure on U.S. regional bank stocks, though Aozora Bank slumped for a second straight session after provisioning for U.S. office loan losses.
Concerns about the health of regional lenders had resurfaced after New York Community Bancorp reported increased stress in its commercial real estate portfolio.
Investors are now waiting for U.S. payrolls data on Friday. Economists expect the U.S. economy added 180,000 new jobs in January, which would be a slowdown from December and perhaps begin to make a case for Federal Reserve interest rate cuts sooner rather than later.
“Although … Fed Chair Powell didn’t think a March rate cut was likely, ultimately … the data will determine the case for when the Fed should start easing,” said National Australia Bank currency strategist Rodrigo Catril.
Weaker payroll data could bring a March rate cut back into play. Markets still see a chance of a March move at about 40%, while pricing 32 basis points (bps) of cuts for May – implying a 100% probability of 25 bps and some chance of a 50 bp easing.
Reflecting the still sizeable cuts expected to come this year – about 145 bps are priced in – and renewed jitters over regional U.S. banks adding to safe-haven demand, longer-term Treasuries are headed for the best week since mid December.
Ten-year treasury yields rose 2 bps to 3.887%, but were still down a whopping 27 basis points for the week. The rate sensitive two-years were also up 2 bps at 4.2186%, but down 15 bps on the week.
The slide in yields pressured the U.S. dollar, which fell 0.5% overnight against its peers and on Friday stuck to the low end of its recent range at 103.03.
The euro was buoyant at $1.0877, having firmed 0.5% overnight after data showed underlying price pressures in the euro zone were still strong.
Sterling was perched at $1.2745, having rallied 0.5% overnight after the Bank of England said it would tread carefully about rate cuts.
In energy markets, oil prices recouped some losses from the previous day following a decision by OPEC+ to keep its oil output policy unchanged, though they are still headed for weekly losses. [O/R]
Brent crude futures rose 0.6% to $79.15 a barrel, after falling more than 2% the previous day, and U.S. West Texas Intermediate crude gained 0.5% to $74.2 a barrel.
Safe-haven gold was flat at $2,055.20.
(Reporting by Stella Qiu; Editing by Sam Holmes and Kim Coghill)