Asia markets jump on soft U.S. CPI; upbeat China retail sales, industrial output

Hong Kong-listed stocks of Chinese electric vehicle firms jumped in early afternoon trading.

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

Markets in Asia rose across the board after upbeat economic data from China. A soft U.S. inflation reading also boosted hopes of the Federal Reserve nearing the end of its interest rate-hiking cycle.

Xpeng is set to report third-quarter results later in the day, with analysts expecting the EV firm to report revenue of 8.54 billion Chinese yuan ($1.63 billion) according to LSEG estimates. It is also expected to report a quarterly net loss of 2.90 billion Chinese yuan.

In the second quarter, the company reported a wider-than-expected loss as well as revenue of 5.06 billion Chinese yuan.

— Shreyashi Sanyal

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

Industrial output increased 4.6% year-on -year in October, higher than 4.5% in September and above a Reuters poll of analysts expectations of 4.4%.

Retail sales grew by 7.6% last month from a year ago, above the 7% growth forecast by a Reuters poll.

The first week of October marked the final big public holiday for the year in China, known as Golden Week. Official data showed domestic tourism spending recovered to nearly 2019 levels, but that was partly due to more people staying within the country since overseas trips had yet to fully return to pre-pandemic levels.

China’s CSI 300 index was last up 0.82% in early trading.

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— Shreyashi Sanyal, Evelyn Cheng

The Chinese economy has been in a funk this year no thanks to a decline in exports, slowdown in consumer spending and a prolonged slump in the property sector, and several analysts are now bearish on the Asian giant.

Chinese stocks have done poorly – Hong Kong’s Hang Seng index has plummeted around 14% in the year to date, while the Shenzhen Component is down 10%.

Many emerging market funds have also reduced their allocations on China by some 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 right now, naming sectors – and stocks – that are poised

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— Amala Balakrishner

As the end of the year approaches, investors are likely to be reviewing their portfolios and considering which stocks to sell to harvest tax losses.

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

To aid investors, Scotiabank identified several stocks on Canada’s TSX Composite index that are down significantly this year but are still rated as “Sector Outperform” by its analysts.

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— Ganesh Rao

Japan’s economy shrank in the July-September period for the first time in four quarters, provisional government data showed Wednesday, amid slowing global demand and rising domestic inflation.

Provisional gross domestic product fell 2.1% in the third quarter compared to a year ago, while also recording a 0.5% decline from the previous quarter.

Economist surveyed by Reuters had expected the world’s third-largest economy to post an annualized 0.6% decline and a quarter-on-quarter 0.1% contraction in the July-September quarter.

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— Clement Tan

Oil settled flat Tuesday as traders weighed signs that Middle East tensions may be easing against higher crude demand forecasts.

Brent crude contracts for January fell 5 cents to settle at $82.47 a barrel, while U.S. West Texas Intermediate contracts for December held steady at $78.26.

There were some signs that Middle East tensions may ease with President Joe Biden saying he believes a deal can be reached to free hostages taken by Hamas. Fears that the Israel-Hamas war could spread had sent crude prices higher in mid-October.

Crude prices rose earlier in the day after the International Energy Agency boosted its crude demand forecasts and cooling U.S. inflation strengthened the case that the Federal Reserve may be done hiking interest rates.

— Spencer Kimball

Inflation is dropping this year at a near-record pace, but more progress needs to be made, Chicago Federal Reserve President Austan Goolsbee said Tuesday.

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

Improvements in supply and accelerating productivity drove the declines, he said.

“Progress continues, though we still have a way to go,” Goolsbee said. “In 2023, we may equal or even surpass that one-year mark for a fall in CPI inflation. And we may do that with an unemployment rate that never gets above 4 percent,” he added.

Goolsbee said the U.S. can have strong growth without inflation due to the unwinding of supply shocks. The key to further cooling of inflation will be housing, he said.

— Michelle Fox, Jeff Cox, Steve Liesman, Reuters

The market is in a celebratory mood after the consumer price index reading Tuesday morning and could be readying for an end-of-year climb, said Gina Bolvin, president of Bolvin Wealth Management Group.

“We need to see more months with soft inflation data, but the stock and bond market is celebrating today,” Bolvin said. “We’re set up nicely for a year-end rally.”

Similarly, AXS Investments CEO Greg Bassuk called the data an “early holiday present” for investors unclear about what the Federal Reserve will do with interest rates for the remainder of 2023.

The data “is being cheered by Wall Street and Main Street alike, as a Fed move from hawkish to dovish interest rate policy is just the holiday gift coveted by investors,” Bassuk said.

“October’s cooler CPI data, combined with a slowing but resilient economy, bodes well for the economy’s soft landing, while positioning 2024 for lower interest rates and the prospects for robust stock market growth,” he added.

— Alex Harring

The Fed appeared justified in its interest rate cycle after the latest consumer price index reading, according to Bryce Doty, senior portfolio manager at Sit Fixed Income Advisors.

“The Fed looks smart for effectively ending its tightening cycle as inflation continues to slow,” he said. “Yields are down significantly as the last of investors not convinced the Fed is done are likely throwing in the towel.”

— Alex Harring