Stock information is displayed on an electronic board at a securities brokerage in Shanghai, China. (Photographer: Qilai Shen/Bloomberg)

China Overrides Japan as Asian Stocks Markets Stage Comeback

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

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 Chinese shares 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 was clear: the regional gauge encompassing all major markets slipped 0.3 percent as of 4:31 p.m. in Hong Kong, while the MSCI Asia Pacific Index excluding Japan climbed 0.8 percent.

  • The Hang Seng Index rose 2.2 percent and the Shanghai Composite gained 2.1 percent
  • Japan’s Nikkei 225 Stock Average fell 2.3 percent and the broader Topix dropped 1.5 percent
China Overrides Japan as Asian Stocks Markets Stage Comeback

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.
  • The China Caixin December services purchasing managers’ index came in at 53.9, compared with the estimated 53.
  • China Premier Li visited ICBC, Bank of China and CCB, and said the nation will strengthen its counter-cyclical macro policy adjustment, further cutting taxes and fees. A gauge of Chinese financial firms rallied the most since October.
  • Following 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. Disappointing readings from export-heavy Asia economies, Apple Inc.’s forecast cut hitting suppliers, and weaker economic data from the U.S. 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.

The divergence across the region can also be seen in smaller markets: Taiwan’s benchmark slumped, making it the biggest loser in Asia as foreigners fled after Apple’s warning, while the key stock gauge in the Philippines soared for a third straight session, making it the second-best performer among global equities tracked by Bloomberg.

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 Friday, where Federal Reserve Chairman Jerome Powell will speak, along with predecessors Janet Yellen and Ben Bernanke.

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