Asian markets jump on weak US CPI; Upbeat Chinese retail sales and industrial production

Shares of Chinese electric vehicle companies listed in Hong Kong jumped in early afternoon trading.

BYD, Nio, Xpeng and Li Auto shares rose between 2.47% and 6.11%.

Markets in Asia generally rose after upbeat economic data from China. A weak inflation reading in the United States also raised hopes that the Federal Reserve is nearing the end of its interest rate hike cycle.

Xpeng is scheduled to report third-quarter results later today, with analysts expecting the electric car company to report revenue of CNY8.54 billion ($1.63 billion), according to LSEG estimates. It is also expected to post a quarterly net loss of CNY2.90 billion.

In the second quarter, the company reported a larger-than-expected loss on top of revenue of CNY 5.06 billion.

– Shreyashi Sanyal

China’s industrial production and retail sales grew faster than expected in October, according to data from the National Bureau of Statistics.

Industrial production The index increased 4.6% year-on-year in October, compared to 4.5% in September, and higher than analysts’ expectations in a Reuters poll of 4.4%.

Retail sales grew 7.6% last month compared to a year ago, exceeding growth expectations of 7% in a Reuters poll.

The first week of October was the last major public holiday of the year in China, known as Golden Week. Official data showed that domestic tourism spending has recovered to almost 2019 levels, but that is partly because more people are staying within the country because outbound trips have not yet fully returned to pre-pandemic levels.

China’s CSI 300 index rose 0.82% in early trading.

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– Shreyashi Sanyal, Evelyn Cheng

China’s economy has been a mess this year, thanks to falling exports, slowing consumer spending and a prolonged slump in the real estate sector, and many analysts are now bullish on the Asian giant.

Chinese stocks have fared poorly, with Hong Kong’s Hang Seng down nearly 14% year to date, while the Shenzhen Composite Index is down 10%.

Many emerging market funds also reduced their allocations to China by about 200 basis points this year and shifted their weight to other markets such as Taiwan, India, South Korea, Brazil and Mexico in anticipation of better valuations and growth.

However, analysts see opportunities in the Chinese market at the moment, and cite sectors – and stocks – that are gearing up

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– Amala Balakrishner

As the end of the year approaches, investors will likely review their portfolios and think about which stocks to sell to capture tax losses.

Tax loss harvesting is a strategy to offset capital gains tax from stocks that have increased in share price with losses from non-performing stocks.

To help investors, Scotiabank has identified several stocks in Canada’s TSX Composite Index that have declined significantly this year but are still rated as “sector outperform” by its analysts.

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– Ganesh Rao

Interim government data showed on Wednesday that the Japanese economy contracted in the period from July to September for the first time in four quarters, amid a slowdown in global demand and a rise in domestic inflation.

Interim GDP It decreased by 2.1% in the third quarter compared to last year, while also recording a decline of 0.5% from the previous quarter.

Economists polled by Reuters had expected the world’s third-largest economy to post a 0.6% annual decline and a 0.1% quarter-on-quarter contraction in the July-September quarter.

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– Clement Tan

Oil prices held steady on Tuesday, as traders weighed signs that tensions in the Middle East may be easing against expectations of rising demand for crude oil.

Brent crude contracts for January fell five cents to settle at $82.47 a barrel, while US West Texas Intermediate crude contracts for December settled at $78.26.

There were some signs that tensions in the Middle East may ease with President Joe Biden saying he believed an agreement could be reached to release hostages held by Hamas. Fears about the possibility of war spreading between Israel and Hamas led to a rise in crude oil prices in mid-October.

Crude oil prices rose earlier in the day after the International Energy Agency boosted its demand forecast for crude oil, and slowing inflation in the United States raised the possibility of the Federal Reserve raising interest rates.

–Spencer Kimball

Inflation is falling this year at a near-record pace, but more progress is needed, Chicago Fed President Austin Goolsbee said Tuesday.

This year may be the fastest period of cooling, outside of wartime, while there is full employment, he said in prepared remarks for a Detroit Economic Club event on Tuesday. Goolsbee is the first Fed official to react to Tuesday’s CPI report, which was flat month-on-month in October.

He said improvement in supply and acceleration in productivity led to the decline.

“Progress continues, although we still have a way to go,” Goolsby said. “In 2023, we may equal or even exceed the one-year mark for low CPI inflation. We may do so with an unemployment rate that never exceeds 4 percent,” he added.

Goolsbee said the United States could achieve strong growth without inflation due to easing supply shocks. The key to further cooling inflation will be housing, he said.

— Michelle Fox, Jeff Cox, Steve Lessman, Reuters

Gina Bulfin, president of Bulfin Wealth Management Group, said the market is in a celebratory mood after Tuesday morning’s CPI reading, and may be poised to rise at the end of the year.

“We need to see more months with weak inflation data, but the stock and bond markets are celebrating today,” Bulvin said. “We are well prepared for the end-of-year gathering.”

Likewise, Greg Bassock, CEO of AXS Investments, called the data an “early holiday gift” for investors who are unclear about what the Fed will do with interest rates for the remainder of 2023.

Bassok said that the data “was welcomed by Wall Street and Main Street alike, as the Fed’s move from a tight interest rate policy to an easy-to-drug policy is just the holiday gift that investors are coveting.”

“Cooler October CPI data, coupled with a slowing and resilient economy, bode well for a soft landing for the economy, while positioning 2024 for lower interest rates and strong stock market growth prospects,” he added.

-Alex Haring

The Fed appeared vindicated in the interest rate cycle after the latest CPI reading, according to Bryce Doty, senior portfolio manager at Sit Fixed Income Advisors.

“The Fed looks smart to effectively end the tightening cycle as inflation continues to slow,” he said. “Yields have fallen significantly as the last investors unconvinced that the Fed is done are likely to capitulate.”

-Alex Haring