Battling between US optimism, China pessimism

BEIJING: A wave of economic data from the Asia & Pacific region hits local markets on Monday, as investors get their first chance to react to the sizzling U.S. employment numbers from Friday and digest the latest deterioration in sentiment towards China.

Monday's economic calendar includes purchasing managers index figures from several countries including China and Japan, Indonesian GDP, Thai inflation and Australian trade.

If Asian markets take their cue from Wall Street, expect a burst higher. There was nothing in the January jobs report that suggests the U.S. economy's momentum is fading. Quite the opposite.

With the tailwinds of bumper tech earnings also behind them, the S&P 500 roared to a new all-time high and the Nasdaq jumped to a fresh two-year peak. Remarkably, that is the S&P 500's 13th weekly gain out of the last 14.

Music to Asian bulls' ears, right? Yes, but there are grounds for caution - the dollar bounced back, U.S. bond yields are soaring, and concern over China's economy and markets is back at the forefront of investors' minds.

China's CSI 300 index of blue chip shares fell on Friday, bringing its losses for the week to 4.6%. That's the biggest weekly decline since October 2022, and comes as the index fell six months in a row for the first time ever.

The IMF last week warned that China's growth could slow to 3.5% by 2028, and the United States added more than a dozen Chinese companies to those it alleges are working with Beijing's military, as part of a broader effort to keep American technology from aiding China.

Meanwhile, Republican presidential candidate Donald Trump has said he would impose tariffs on China again if he is elected in November and they could exceed 60%.

That said, the poor price action, newsflow and sentiment are drawing some investors in. Bank of America and EPFR data show cumulative inflows into Chinese stocks have hit a new record, and Goldman Sachs says hedge funds have been buying at the fastest pace in five years.

Elsewhere on Monday, Indonesia releases fourth-quarter GDP figures. Investors expect year-on-year growth of 5.0%, supported by resilient domestic consumption, but quarter-on-quarter growth of just 0.4%.

Figures from Bangkok are expected to show annual headline inflation in Thailand remains stuck just under 0.6%, and core prices again shrinking by around 0.8%.

The government has raised pressure on the Bank of Thailand to cut its policy rate, currently at a decade-high of 2.50%, at its Feb. 7 meeting. But the central bank has pushed back, and governor Sethaput Suthiwartnarueput told Reuters last week that the current rate was 'broadly neutral'.

Here are key developments that could provide more direction to markets on Monday:

- China Caixin services PMI (January)

- Indonesia GDP (Q4)

- Australia trade (December)