Asian stocks mostly rise as China economy slows

SYDNEY Reuters Asian share markets got off to a cautious start on Monday as the U.S. earnings season loomed large and a slew of Chinese economic data was expected to show the deadening effect of coronavirus restrictions on activity.

A holiday in the United States made for thin trading, but that did not stop Brent crude from extending its bull run toward last year's peak of $86.70 a barrel.

MSCI's broadest index of Asia-Pacific shares outside Japan was little changed, while Japan's Nikkei bounced 0.8% after losing 1.2% last week.

The market has recently shifted its focus to value stocks and away from growth, particularly technology. The S&P 500 information technology sector, which accounts for nearly 29% of the index, has lost 5.5% this year.

Earnings will have to be strong to stop further losses, with valuations still high. According to Refinitiv IBES, the S&P 500 earnings are expected to rise 23.1% this season, while the tech sector is up 15.6%, according to Refinitiv IBES.

The market will be spared speeches from Federal Reserve officials this week ahead of their Jan. 25 -- 26 policy meeting, but there has been more than enough hawkish comments to see the market almost fully price in a first rate hike for March.

There was talk that the Fed would start trimming its balance sheet earlier than previously thought, draining some excess liquidity from world markets.

Yields on cash 10 year Treasuries climbed to their highest level in a year at 1.8%, while futures implied yield of 1.83% were early on Monday.

Analysts at Barclays noted that the implications of quantitative tightening continue to occupy markets as an earlier Fed balance sheet runoff looms.

The near-term growth outlook in Europe and the U.S. is now weaker, while the new COVID lockdowns in China could cause global supply bottlenecks to be worse. Retail sales and industrial output slowed further in December, according to data released from China on Monday. The economy is projected to have grown 1.1% in the fourth quarter, but the annual pace is expected to slow to 3.6% from 4.9%.

Sources told Reuters policy makers were debating how soon they could start telegraphing an eventual interest rate hike, a decision that will bear watching at the Bank of Japan BOJ policy meeting this week, given talk it will revise its outlook for growth and inflation.

Financial markets may be underestimating its readiness to phase out its once-radical stimulus programme this year, although a move is unlikely this year.

The dollar fell 1.2% last week to 114.29, but still well above major chart support at 112.52, one of the reasons the yen rallied. FRX The euro gained 0.5% last week as the dollar eased broadly and was last changing hands at $1.1408. The dollar index was a bit firmer at 95.231 after touching a 10 week trough at 94.626 on Friday.

Joseph Marlow, economist at Capital Economics, believes that the dollar will strengthen in the near future, as we expect strong cyclical price pressures in the U.S. to mean the Fed tightens by more and longer than investors currently discount.

They see Fed rates topping 2.5% while the market has priced in a peak of around 1.75 -- 2.0%. The risk of higher rates kept non-yielding gold at $1,817 an ounce, while industrial and energy resources benefited from resilient demand and limited supplies. GOL Oil prices have climbed for four weeks in a row and there is demand that physical barrels of oil are changing hands at near record highs. O R Early Monday, Brent had added 51 cents to $86.57 a barrel and was close to the 2021 top of $86.70 and the 2018 peak at $86.74. A break there would take it to new heights last visited in 2014.

U.S. crude fell 75 cents to $84.57 per barrel.