Asian stocks mixed after Wall St record, eyes on Evergrande impact

Hong Kong – Asian markets were mixed Tuesday as another record on Wall Street was unable to help extend the previous day’s advance, with traders eyeing a Federal Reserve meeting, big-name earnings and key data.

They were also trying to ascertain the long-term impact of Monday’s order from a Hong Kong judge to liquidate indebted developer Evergrande, which fanned fresh fears about China’s already fragile economy.

Another all-time high for the Dow and S&P in New York was fuelled by a retreat in yields caused by a cut in the Treasury’s quarterly borrowing forecast, which eased worries about a flood of debt hitting financial markets.

That came ahead of the Fed’s latest policy meeting, where traders expected it to hold interest rates but hope to get some future guidance, with a 50 percent chance of a March cut.

The Fed’s meeting is followed by the closely watched non-farm payrolls report and earnings from Wall Street tech titans including Microsoft, Google parent Alphabet, Apple and Facebook parent Meta.

“This week could be key,” said Chris Larkin at E*Trade from Morgan Stanley.

“If the market is going to sustain its latest breakout, it may need to avoid earnings disappointments from this week’s big-tech lineup, get encouraging news from the Fed on interest rates, and see jobs numbers that are solid, but not too hot.”

Some Asian markets tracked the US gains, with Tokyo, Sydney, Singapore, Bangkok and Jakarta in the green.

Seoul, Taipei, Manila and Mumbai were down.

But Hong Kong and Shanghai led losses a day after Evergrande’s liquidation order, the latest blow to China’s shattered property sector, which has seen numerous firms crippled by ballooning debts since a government clampdown began in 2020.

With Evergrande’s debts topping $300 billion, the winding-up has sparked speculation about how creditors will actually get their cash back, or even if they will, and what that could mean to China’s long-term economic prospects.

The crisis in the property sector has been a key factor in a sharp slowdown in growth in the world’s number two economy, and leaders’ failure to come up with big enough stimulus has seen equity markets tank in recent years. 

“Whether overseas creditors will have any claim on Evergrande’s domestic assets and so recover some cents in their dollars, is a point of contention,” said National Australia Bank’s Ray Attrill.

“If not, it can only further dampen international enthusiasm toward future investments in China.”

Still, there is an expectation officials will unveil fresh support measures at upcoming Communist Party meetings, while talk of an interest rate cut is also swirling. 

“Market expectation for a rate cut in February is gaining traction, especially after (the central bank’s) surprising announcement to cut RRR,” said Ming Ming, at Citic Securities, referring to a reduction in the proportion of cash banks must keep in reserve, to boost lending.

– Key figures around 0700 GMT –

Tokyo – Nikkei 225: UP 0.1 percent at 36,065.86 (close)

Hong Kong – Hang Seng Index: DOWN 2.2 percent at 15,731.89 

Shanghai – Composite: DOWN 1.8 percent at 2,830.53 (close)

Dollar/yen: DOWN at 147.33 yen from 147.48 yen on Monday

Euro/dollar: DOWN at $1.0818 from $1.0838

Pound/dollar: DOWN at $1.2703 from $1.2710 

Euro/pound: DOWN at 85.18 pence from 85.24 pence

West Texas Intermediate: UP 0.6 percent at $77.26 per barrel

Brent North Sea Crude: UP 0.5 percent at $82.84 per barrel

New York – Dow: UP 0.6 percent at 38,333.45 (close)

London – FTSE 100: FLAT at 7,632.74 (close)