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What’s happening: Stock markets in China recorded gains on Monday with onshore traders returning from a long holiday.
What happened: Investors assessed the release of economic reports on spending and tourism after returning from the Lunar New Year holidays.
The People’s Bank of China also announced its policy decision, keeping its key rate unchanged on Sunday.
Why it matters: Mainland China remained closed from February 9 to 16 due to the Lunar New Year holidays. During the eight-day holiday period, around 474 million domestic trips were made by tourists, representing a rise of about 34% from the same holiday season in 2023 and of 19% from the same period in 2019, according to data released by the Ministry of Culture and Tourism.
The strong travel data provided a boost to tourism stocks, which rose sharply on Monday.
Total spending by domestic tourists during the Chinese New Year holidays came in at 632.7 billion yuan. On an average, around 166.85 yuan per trip per day was spent, representing a 6% decline from the pre-pandemic levels.
China’s current account surplus narrowed to $55.2 billion in the fourth quarter, from $103.1 billion in the year-ago period, according to a preliminary reading. This represented the smallest surplus after China recorded a deficit in the first quarter of 2020. Goods surplus shrunk to $153.6 billion in the fourth quarter, from $161.3 billion in the previous year.
The People’s Bank of China held its medium-term lending facility rate at 2.5% during its meeting on February 18. In January, the board had slashed the reserve requirement ratio for commercial banks by 50 basis points, which was the biggest reduction in two years.
Meanwhile, China’s Foreign Minister Wang Yi told US Secretary of State Antony Blinken that Washington must lift restrictions on Chinese companies and individuals.
The CSI 300 jumped 1.16% to close at 3,403.81 on Monday. The benchmark index recovered from a five-year low before the start of the New Year holidays, gaining 5.8% in the week before the holiday period.
China’s Shanghai Composite Index surged 1.56% to settle at 2,910.54 on Monday. However, Hong Kong’s Hang Seng index fell 1.13% to close at 16,155.61, while Japan’s Nikkei 225 lost 0.04% to settle at 38,470.38 on Monday.
What to watch: Investors will monitor the People’s Bank of China’s monthly fixing of its benchmark loan prime rate on Tuesday.
The release of data on new home prices, due to be released later this week, will also remain in focus. Analysts expect China’s new home prices to decline by 0.7% year-over-year in January, compared to a 0.4% downturn in the prior month.
Context: The CAD/USD forex pair rose on Monday as investors monitored recent economic data.
Details: Data released on Monday showed industrial producer prices in Canada easing by 0.1% in January, after a 1.6% decline in the prior month. Canada’s PPI fell for the fourth straight month, amid a sustained decline in the prices of food and key commodities.
The Raw Materials Price Index in Canada rose 1.2% in January, representing the first rise in four months. This was higher than the 4.9% decline recorded in December and above market estimates of a 0.7% rise.
Some strength in the price of crude oil, one of Canada’s major exports, also lent support to the loonie on Monday.
The CAD/USD forex pair breached the 1.35 level on Monday. The S&P/TSX Composite Index rose 0.16% to close at 21,255.61 on Monday.
What to watch: Investors await the release of inflation data from Canada today. Analysts expect the annual inflation rate in Canada to ease to 3.3% in January, from 3.4% in December. The annual core inflation rate in Canada is projected to slow to 2.5% in January, from 2.6% in the previous month.
Other Markets: European indices closed mostly higher on Monday, with the FTSE 100, CAC 40 and STOXX Europe 600 Index up by 0.22%, 0.01% and 0.16%, respectively, and the DAX 40 down by 0.15%.
Danish Prime Minister Mette Frederiksen said the country plans to donate all its artillery to Ukraine. The news sent the RUB/USD pair slightly lower in forex trading this morning.
Brazil’s Industrial Entrepreneur Confidence Index declined by 0.5 points to a reading of 52.7 in February. The index remaining in the positive zone of above 50 for the ninth straight month lent support to the BRL/USD forex pair.
Israel’s economy contracted an annualised 19.4% in the fourth quarter, versus a 1.8% expansion in the third quarter, which sent the ILS/USD pair lower in forex trading this morning.
Spain’s consumer confidence indicator rose to 78.6 in January, from 77.6 a month ago. Despite this, the EUR/USD forex pair remained under pressure.
South Korea’s Composite Consumer Sentiment Index rose to 101.9 points in February, from 101.6 in January. However, the projected inflation rate for the upcoming year remaining unchanged at 3.0% sent the KRW/USD pair lower in forex trading this morning.
South Africa’s composite leading business cycle indicator, number of unemployed persons and unemployment rate, Eurozone’s current account and construction output, Italy’s construction output and current account, Turkey’s government debt, as well as Argentina’s balance of trade.
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