US, Europe Futures Dip as Asian Equities Retreat: Markets Wrap

Despite lowering China's mortgage reference rate, US and European equity futures dropped along with Asian stocks due to concerns about the world's second-largest economy.

Following the US markets' Monday holiday closure, contracts for the benchmark S&P 500 and Nasdaq 100 declined. A measure of Asian stocks fell for the first time in four sessions, and futures for the Euro Stoxx 50 index for the whole region also declined.

South Korea, Australia, and Japan all had red benchmarks. The Nikkei 225 and the global stock index were approximately 1% from their peak. 

The focus was on China, where stocks moved after domestic banks lowered a benchmark mortgage interest rate by an unprecedented amount, suggesting that the country was increasing support for the real estate industry to boost demand. Chinese developer stock index increased.

According to Willer Chen, a Forsyth Barr Asia Ltd. analyst, the commercial banks made a "good gesture" by lowering the prime rate on five-year loans. However, the issue with properties is still unrelated to mortgage rates. "I would not expect much," but the move might "slightly boost the property demand." 

In the first session after the Lunar New Year holiday, gains in Chinese equities on Monday fell short of forecasts. The country's exchange-traded funds saw increased trading volume, which suggested that state-backed funds were still supporting the market.

Regarding China's most recent attempt to boost the economy, Moh Siong Sim, currency strategist for the Bank of Singapore, stated on Bloomberg Television that "confidence is low right now and there is a need to stabilise it." He stated that since monetary policy is loosened, Chinese bond yields will probably decline.

Turning Point

A fresh boost to the equity market could come from bellwether Nvidia Corp.'s earnings on Wednesday as investors assess the global economy's health. The company that makes chips has outperformed Amazon.com Inc. regarding market value, likely due to its anticipation of significant gains from advances in artificial intelligence.

On Bloomberg Television, Charles-Henry Monchau, chief investment officer at Banque Syz, stated, "Nvidia's results on Wednesday could be a turning point for the markets." "There is a risk of a pullback if the market is dependent on a small number of large-cap growth stocks, and they could disappoint for any reason."

The largest miner in the world, BHP Group, announced $6.57 billion in underlying profits in Australia, which was less than expected. The company noted that China's main client demand remained strong despite the housing market's downturn.

In other business news, Capital One Financial Corp. will acquire Discover Financial Services for $35 billion in all stock, making it the biggest credit card company in the US based on loan volume.

This week's other potential market mover includes the Fed's release of the minutes from its January meeting on Wednesday and the Eurozone's inflation data due on Thursday.

Gold prices were mostly unchanged elsewhere on Monday, even though they had increased to $2,020 an ounce. Amidst persistent tensions in the Red Sea, an essential trade route, the price of US oil, West Texas Intermediate, has gradually increased.

Some of the key events this week:

• European Central Bank publishes euro-area indicator of negotiated wage rates, Tuesday
• Rio Tinto Plc earnings, Wednesday
• Eurozone consumer confidence, Wednesday
• Nvidia Corp earnings, Wednesday
• Federal Reserve Jan. meeting minutes, Wednesday
• Atlanta Fed President Raphael Bostic speaks on Wednesday
• Eurozone CPI, PMI, Thursday
• European Central Bank issues account of Jan. 25 meeting, Thursday
• Fed Governor Lisa Cook and Minneapolis Fed President Neel Kashkar speak on Thursday
• China property prices, Friday
• European Central Bank executive board member Isabel Schnabel speaks on Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.2% as of 3:27 p.m. Tokyo time
• Nasdaq 100 futures fell 0.2%
• S&P/ASX 200 futures were little changed
• Hong Kong's Hang Seng was little changed
• The Shanghai Composite rose 0.3% 
• Euro Stoxx 50 futures fell 0.3%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0771
• The Japanese yen fell 0.2% to 150.38 per dollar
• The offshore yuan was little changed at 7.2087 per dollar

Cryptocurrencies

• Bitcoin was little changed at $51,927.38
• Ether fell 1.2% to $2,931.12 

Bonds

• The yield on 10-year Treasuries advanced two basis points to 4.30%
• Japan's 10-year yield was unchanged at 0.725%
• Australia's 10-year yield advanced one basis point to 4.18%

Commodities

• West Texas Intermediate crude rose 0.4% to $79.49 a barrel
• Spot gold rose 0.1% to $2,019.48 an ounce
• This story was produced with the assistance of Bloomberg Automation.