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Asia shares weak on China outlook, rate cut bets prospects


MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.1%, though it was still staying near Wednesday’s two-month low of 490.45 points

 Asian shares were off to a tepid start on Thursday, weighed down by a weak economic outlook in China and expectations the global rate easing cycle may not come as early as some had initially thought.

U.S. Treasury yields rose while the dollar hovered near a one-month high as investors reduced their bets on a rate cut by the Fed beginning as early as March.

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.1%, though it was still staying near Wednesday’s two-month low of 490.45 points.

The index had slid over 2% on Wednesday, its sharpest one-day percentage drop in over five months, led by a plunge in Chinese stocks after a range of economic data pointed to a shaky economic recovery in China.

For Asia in particular, there are a few negative things that are impacting markets, said Khoon Goh, head of Asia research at ANZ.

The cutting back of rate cut expectations is definitely a factor but for Asia, the bigger driver is the growth concerns around China, Goh said. That continues to pose worries for investors.

China’s economy grew 5.2% last year, marginally more than the official target, but the recovery was far shakier than many analysts and investors expected, with a deepening property crisis, mounting deflationary risks and weak demand casting a pall over the outlook for this year.

China’s blue-chip stock index slumped at 3,204.6383 points, its lowest since 2019, while Hong Kong’s Hang Seng Index hit a more than 14-month low of 15,183.96.

As bearish as the Hang Seng is, it is trying to find support near 15,300 after an extended move down, said Matt Simpson, senior market analyst at City Index.

I see no immediate reason to be a buyer of China’s equities, but bears may want to warrant caution, particularly as the index moves towards 15,000 and the 2022 low as they strike me as obvious support levels to trigger a shakeout, he said.

Japan’s Nikkei, meanwhile, remained a standout and gained 0.3%, staying near Wednesday’s 34-year high as the market extends its bull run.

In Australia, data on Thursday showed employment dropped steeply in December after two months of surprisingly strong growth, while the jobless rate stayed at a 1-1/2 year high, a result that added to hopes interest rates have peaked.

That sent the Aussie dropping in an initial knee-jerk reaction, though it later pared some of those losses and was last 0.05% up at $0.6555.

The country’s S&P/ASX 200 index was last 0.75% down, after having slipped to a one-month low earlier in the session, tracking a drop in global equities.

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