Asian shares mostly lower, China gains on GDP rebound

Shares fell Monday across most of Asia following a retreat on Wall Street, but benchmarks in Hong Kong and Shanghai rose after data showed the Chinese economy grew a solid 2.3 per cent in 2020. The stronger than expected performance for the world's second-largest economy helped counter growing wariness among investors over deepening economic devastation from the pandemic.

Stocks seem to have run out of steam since the S&P 500 set a record high a week ago amid optimism that COVID-19 vaccines and more stimulus from Washington will bring an economic recovery. China was the first country to suffer outbreaks of the new coronavirus and the first major economy to begin recovering as meanwhile the U.S., Europe and Japan are struggling with outbreaks.

The Hang Seng in Hong Kong gained 0.2per cent to 28,635.16 while the Shanghai Composite index climbed 0.3per cent to 3,576.22. Australia's S&P/ASX 200 declined 0.8per cent to 6,665.00. Shares also fell in Southeast Asia and Taiwan. But gloom prevailed in other major regional markets. Tokyo's Nikkei 225 dropped 0.8per cent to 28.293.51 and the Kospi in South Korea lost 0.7per cent to 3,063.96.

China's National Statistical Bureau said growth in the three months ending in December rose to 6.5per cent over a year earlier, up from the previous quarters 4.9per cent, official data showed Monday. The economy contracted at a 6.8per cent pace in the first quarter of 2020 as the country fought the pandemic with shutdowns and other restrictions.

Some measures showed a slowing of activity in December, but “The big picture is still that activity remains strong, which is helping to support the labor market," Stephen Innes of Axi said in a commentary. On Friday, the S&P 500 fell 0.7per cent to 3,768.25, with stocks of companies that most need a healthier economy taking some of the sharpest losses. It lost 1.5per cent over the week.

The Dow Jones Industrial Average lost 0.6per cent to 30,814.26, and the Nasdaq composite dropped 0.9per cent to 12,998.50. The Russell 2000 index of small-cap stocks lost 1.5per cent to 2,123.20. Treasury yields also dipped as reports showed shoppers held back on spending during the holidays and are feeling less confident, the latest in a litany of discouraging data on the economy.

Friday was the first chance for traders to act after President-elect Joe Biden unveiled details of a USD1.9 trillion plan to prop up the economy. He called for USD1,400 cash payments for most Americans, the extension of temporary benefits for laid-off workers and a push to get COVID-19 vaccines to more Americans.

That fit investors expectations for a big and bold plan, but markets had already rallied powerfully in anticipation of it. Bidens Democratic allies will have control of the House and Senate, but only by the slimmest of margins in the Senate. That could hinder the chances of the plan's passage. The urgency for providing such aid is ramping by the day. One report on Friday showed that sales at retailers sank by 0.7per cent in December, a crucial month for the industry.

The reading was much worse than the 0.1per cent growth that economists were expecting, and it was the third straight month of weakness. For many investors the big question is what ramped up government spending may mean for interest rates and inflation. Treasury yields have been climbing on expectations the government will borrow much more to pay for its stimulus, in addition to improved economic growth and higher inflation.

The yield on the 10-year Treasury zoomed above 1per cent last week for the first time since last spring and briefly topped 1.18per cent this week. Higher interest rates could divert some investments away from shares and into bonds. The yield on the 10-year Treasury was steady at 1.09per cent.

In other trading, benchmark U.S crude oil lost 47 cents to USD51.89 per barrel in electronic trading on the New York Mercantile Exchange. It gave up USD1.21 on Friday to USD52.36. Brent crude, the international standard, shed 52 cents to USD54.58 per barrel. The dollar was trading at 103.72 Japanese yen, down from 103.88 yen on Friday. The euro was almost unchanged at USD1.2078. 

(Image Credits: AP)