China’s Central Bank Surprises Markets, Skips Rate Cut, Economic Recovery Remains Fragile

Asian stocks stumbled on Monday as China opted not to implement a rate cut, raising concerns about a fragile economic recovery. Chinese blue chips eased by 0.5%, hitting their lowest level since early 2019. Investors are anticipating underwhelming economic growth data for the fourth quarter of 2021, as Beijing continues its gradual approach to stimulating the economy. Despite a holiday in the United States, congressional leaders agreed on another stopgap spending bill to avert a potential government shutdown. The MSCI’s broadest index of Asia-Pacific shares outside Japan declined by 0.2%. However, Japan’s Nikkei rose by 0.6% to a fresh 34-year peak. In the futures market, S&P 500 and Nasdaq futures were down around 0.1%, while EUROSTOXX 50 futures added 0.1%. Earnings reports from Goldman Sachs and Morgan Stanley, as well as US retail sales data and the Iowa caucus, are expected to be key market events this week. The victory of Taiwan’s ruling Democratic Progressive Party had limited market impact, but geopolitical tensions with China continue to pose uncertainties.