SYDNEY- Asian stock markets were in a wary mood on Monday as surging bond yields challenged equity valuations, particularly for the richly priced tech sector, in a week packed with central bank meetings and major economic data.
Figures from China out on Monday showed retail sales rose just 3.0 percent in November, compared to a year earlier, well below market forecasts of 4.6 percent and evidence of the need for much more aggressive stimulus. Industrial production was much as expected, while house prices were still falling, though at a slower pace.
China’s blue chip index eased 0.4 percent, having dropped more than 2 percent last Friday.
Over the weekend, an official at China’s central bank said it had room to further cut the reserve requirement ratio, though credit numbers out last week showed past easing had done little to boost borrowing.
Interest rates are expected to fall in the United States and Sweden later this week, and hold steady in Japan, the UK and Norway.
The Federal Reserve will lead the pack on Wednesday with markets pricing a 96 percent probability it will cut rates by 25 basis points to a new range of 4.25 percent to 4.50 percent.
More important will be any guidance on future easing, including the “dot plot” forecasts of Fed members for rates over the next couple of years.
“We look for the updated dots to signal a median expectation for three cuts next year, down from four in the September projection,” said JPMorgan economist Michael Feroli. “The median longer-run dot, which was 2.875 percent in September, we see moving up to 3 percent or maybe even 3.125 percent.”
“That said, given the vagaries of trade and other policies next year, the signal from the dots may be even less useful than ordinarily.”
Investors have been steadily scaling back expectations of how far rates may fall, in part reflecting solid economic news and speculation President-elect Donald Trump’s plans for tax cuts and tariffs would expand government borrowing while putting upward pressure on inflation.
