China Overrides Japan as Asian Stocks Markets Stage Comeback

(Bloomberg) -- There’s a stark dichotomy happening in two of the largest Asian stock markets today.

While news of a fresh round of face-to-face meetings between the U.S. and China starting next Monday and a stronger than expected China Caixin services PMI have given Hong Kong and China stock markets the jolt they needed after a rough start to the year, Japan’s benchmark plunged as it played catch up after a four-day holiday.

The division is clear: the regional gauge encompassing all major markets slipped 0.8 percent as of 1:02 p.m. in Hong Kong, while the MSCI Asia Pacific excluding Japan Index climbed 0.4 percent.

• The Hang Seng Index rose 1.4 percent and Shanghai Composite climbed 1.8 percent
• Japan’s Nikkei 225 Stock Average fell 2.7 percent and the broader Topix index dropped 1.9 percent

It looks like the good news has outweighed the bad, for now:

• A U.S. delegation led by Deputy Trade Representative Jeffrey Gerrish will head to China for talks on Jan. 7 and 8, the Commerce Ministry said in a statement.
  • The talks will be the first since Presidents Donald Trump and Xi Jinping agreed to a 90-day truce in their trade war last month, and any progress would be a shot in the arm for markets and economies showing increasing strain as a result of the months-long conflict.
• China Caixin December services purchasing managers’ index was 53.9 compared with the estimated 53.
• China Premier Li visited ICBC, Bank of China and CCB. A gauge of financial firms was poised for its best day since October. Li said China will strengthen its counter-cyclical macro policy adjustment and will further cut taxes and fees.
• After a choppy start to the day, U.S. stock-index futures extended gains after the new House Democratic majority voted Thursday to end the partial government shutdown even though it brought Congress no closer to resolving the impasse over President Trump’s demand to pay for a border wall.

Still, global growth concerns can’t be ignored as more bricks keep getting added to the wall or worry with disappointing readings from export-heavy Asia economies, Apple Inc.’s forecast cut hitting suppliers, and weaker economic data from the U.S. that came through overnight.

“We have beginning-of-the-year jitters, low levels of liquidity and exaggerated swings, which feed people’s worst fears,” said Stefan Hofer, chief investment strategist at LGT Bank.

Where to from here? Aside from the trade talks that will kick off next week, the big event that market watchers will be focused on is the annual meeting of the American Economic Association taking place today, where Federal Reserve Chairman Jerome Powell along with predecessors Janet Yellen and Ben Bernanke will speak.

©2019 Bloomberg L.P.