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Asian stocks weak ahead of China data, U.S. reports

Asian stocks

MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.1% after losing 0.8% last week

Asian shares got off to a weak start on Monday ahead of a week packed with geopolitical risk, Chinese economic data and earnings reports from major U.S. banks.

A holiday in the US made for thin trading, but at least there was progress on averting an imminent government shutdown as congressional leaders agreed on another stopgap spending bill.

MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.1% after losing 0.8% last week. Japan’s Nikkei held steady near 34-year highs, having enjoyed strong gains of 6.6% last week.

S&P 500 futures and Nasdaq futures were both down nearly 0.1% in early trade.

Earnings season rolls on, with Goldman Sachs and Morgan Stanley among those reporting. Retail sales are the main U.S. data of the week.

There was limited reaction to the victory of the ruling, DPP in Taiwan, which essentially left the status-quo intact.

The tensions with China were a reminder that geopolitics will loom over markets this year, with elections across the globe and the threat of a broader conflict in the Middle East.

For now, we think China is still focused on engineering economic stability, said Damien Boey, chief macro strategist at investment bank Barrenjoey.

The equity risk premium globally needs to increase, but it, and the risk free rate are being suppressed at the moment by central bank response functions to lower inflation, Boey said.

China reports economic growth data for Q4 and a string of monthly data on Wednesday, which are expected to show the recovery remains sluggish overall.

Underlining the challenges ahead, China’s central bank is considered likely to cut its one-year medium-term lending facility rate on Monday and pump in extra liquidity.

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