Tuesday, October 19, 2021

APAC Markets End Mixed on China Economic Data

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News shaping
the markets today

     

What’s happening: Asia Pacific stock markets closed mixed on Monday, following the release of several economic reports from China.

What happened: Markets in the region started the week on a mixed note despite broadly positive cues from Wall Street on Friday.

While inflation worries returned with crude oil prices surging to multi-year highs, investors grew concerned about growth in the world’s second-largest economy.

Why it matters: Commodity prices have recently been elevated with central banks around the world looking to roll back their loose monetary policies.

Investor sentiment was hit by the release of China’s data that showed economic growth slowing further in the third quarter, due to the crisis in the country’s property sector. China was expected to spearhead the recovery in the global economy from the pandemic downturn.

China’s GDP expanded by a mere 0.2% on quarter, while growing 4.9% year-over-year in the third quarter, missing market expectations of 5.2% growth.

Other economic releases provided some support to markets. Industrial production rose 3.1% year-over-year in September, while retail sales grew 4.4%. The unemployment rate in the country eased to 4.9% in September, reaching the lowest level since December 2018. Despite these numbers, China’s Shanghai Composite index slipped 0.12% on Monday.

Data released last week also showed September factory-gate costs in China rising at the fastest pace since the figure began being recorded in 1995. Sentiment was further hurt by US wholesale inflation climbing to a record high.

The recent figures are exerting pressure on central banks to begin tapering their stimulus measures, which have helped the global economy recover from the covid-19 led crisis. The US Federal Reserve is widely projected to begin tapering its asset-buying program before yearend, with a rate hike expected before 2023.

“How risk markets respond to the bringing forward of rate hike expectations will be key to watch this week, as will anecdotes from the profit reporting season to see how firms are dealing with higher input costs and to what extent they are able to pass this onto consumers,” National Australia Bank analyst Tapas Strickland said in a note to clients.

Japan’s Nikkei 225 index fell around 0.2% on Monday, after the country’s Prime Minister announced plans to hold sales tax at the current rate. Australia’s ASX/S&P 200 index gained 0.26%, while India’s BSE Sensex jumped 0.75%.

What to watch: Investors will continue to monitor the covid-19 situation around the world, as a rise in cases could negatively impact the pace of the global economic rebound. Markets will also focus on rising inflation in various countries and comments from central banks regarding their monetary policies.

The Markets Today

     

Crude oil will be in focus today ahead of the API’s (American Petroleum Institute) data on crude oil stockpiles.

Context: Crude oil prices surged to their strongest level in years on Monday, following a rebound in energy demand around the world.

Details: The crude oil market has risen substantially over the past seven weeks amid growing demand for energy with the reopening of economies around the world.

Traders also monitored the situation in Europe and some countries in Asia that continue to face a deficit of coal and natural gas. Japan’s Prime Minister Fumio Kishida urged oil producers in the country to boost their output to lend support to industries hit by rising energy costs.

Providing a ray of hope, the Baker Hughes report showed a possible increase in US supply in the near term, with drillers adding oil and natural gas rigs for a sixth straight week.

Crude oil prices climbed to multi-year highs earlier in the session on Monday but pared most of the gains later.

WTI crude for November delivery rose 16 cents, or 0.2%, to close at $82.44 per barrel on the NYMEX on Monday, after jumping as high as $83.87 earlier in the session. WTI crude had closed at $82.28 on Friday, the strongest settlement since October 21, 2014.

Brent crude oil fell 53 cents to settle at $84.33 per barrel, reversing gains recorded earlier in the session. The global benchmark price for oil climbed to a session-high of $86.04, the highest level since October 2018. Both contracts jumped by at least 3% over the past week.

In other energy commodities, wholesale gasoline for November delivery remained almost flat at $2.49 a gallon on Monday, while November heating oil slipped 2 cents to close at $2.55 a gallon. November natural gas lost 42 cents to settle at $4.99 per 1,000 cubic feet.

What to watch: Traders await the release of API’s data on US crude oil stockpiles, which had surged by 5.123 million barrels in the week ending October 8, following a 0.951-million barrel rise a week ago.

Other Markets: European trading indices closed lower on Monday, with the FTSE 100, DAX 40, CAC 50 and STOXX Europe 600 down by 0.42%, 0.72%, 0.81% and 0.50%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Bank of Indonesia’s interest rate decision, Spain's balance of trade, Eurozone’s construction output, America’s housing starts, building permits and Redbook index, as well as China’s foreign direct investment.