US stocks waver as investors digest mixed data

US stocks traded in a tight range on Tuesday after contrasting fourth-quarter results from investment banks Goldman Sachs and Morgan Stanley, while China unveiled underwhelming annual gross domestic product data.

Wall Street’s blue-chip S&P 500 edged 0.2 per cent lower, supported by rising prices for energy and banking companies, while the tech-heavy Nasdaq 100 rose 0.2 per cent.

Morgan Stanley began the day as the S&P’s top performer, rising more than 5 per cent after higher net revenues at its wealth management division overshadowed a 40 per cent year-on-year drop in net income. Goldman Sachs fared less well, declining 7 per cent after the bank’s profits sank by two-thirds in the final three months of last year.

The moves in equity markets came after China’s GDP rose just 3 per cent last year, short of Beijing’s official 5.5 per cent target. However, its economy grew 2.9 per cent in the fourth quarter compared with the same period in the previous year, higher than analyst expectations of 1.6 per cent.

Some investors looked past the country’s first population decline in 60 years to focus on the economic bounce delivered in the final months of last year by Beijing’s abrupt abandonment of its strict zero-Covid policies.

“I don’t think anyone’s surprised by the weakness in the annual growth number, it could have been worse,” said Mitul Kotecha, head of emerging markets strategy at TD Securities. “The data were actually pretty encouraging — industrial production held up better than expected despite weakness in exports, retail sales fell but not by too much, especially once you consider the impact of Covid restrictions.” 

Falling energy prices and a slowdown in inflation have raised hopes that widely expected recessions in Europe and the US this year will not be as deep as initially feared, with China’s reopening proving a further boost.

Still, data out on Tuesday show manufacturing activity in New York State in early January sank to its lowest level since mid-2020, dropping to minus 32.9 from minus 11.2 in the preceding month.

“When Chinese consumers start spending, it will be a material boost to global growth, commodities and Chinese stocks,” said Stephen Innes, managing partner at SPI Asset Management. “It will also mark another positive development for the European growth outlook.”

China’s CSI 300 index of Shanghai- and Shenzhen-listed shares has climbed about 17 per cent since the start of November but was steady on Tuesday, weighted down by consumer non-cyclicals, utilities and healthcare stocks. Hong Kong’s Hang Seng index lost 0.8 per cent, although it has climbed 46 per cent over the past two-and-a-half months.

“Today is probably a pause for markets rather than anything else,” Kotecha added, noting “nervousness” among investors ahead of the Bank of Japan’s policy meeting this week.

The BoJ stunned the markets in December by widening the targeted trading band for its yield curve control policy, signalling a potential shift away from the country’s longstanding ultra-loose monetary regime.

The yield on the benchmark 10-year Japanese government bond surged as a result, as did the yen. Traders are unsure whether the central bank will double efforts on its yield target tweak or scrap it altogether.

Market sentiment was dented on Tuesday by comments from Philip Lane, the European Central Bank’s chief economist, who warned that the bank would “raise [interest] rates more” to ensure cooling inflation continues to fall back to 2 per cent.

“Last year we could say that it’s clear that we need to bring rates up to more normal levels, and now we say, well, actually we need to bring them into restrictive territory,” Lane said.

The regional Stoxx Europe 600 added 0.4 per cent after a quiet start to the day and London’s FTSE 100 fell 0.1 per cent, erasing earlier gains to close in on an all-time high.

Germany’s Dax gained 0.4 per cent, while the yield on the country’s 10-year Bund rose 0.01 percentage points to 2.09 per cent. The moves follow the Zew Institute’s indicator of investor sentiment, which rose for the fourth consecutive month in January, climbing to 16.9 from minus 23.3 in December. Economists polled by Reuters had forecast a reading of minus 15.

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