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A look at the day ahead in Asian and global markets

By Alden Bentley, Breaking News Editor, Finance & Markets, Americas

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The court-ordered liquidation of debt-laden China Evergrande <3333.HK> was expected and hardly rattled Asian investors aside from its bond holders and property developers, meaning Japan’s employment data Tuesday and the midweek U.S. Federal Reserve policy statement could be better attention grabbers.

China’s blue-chip CSI300 Index <.CSI300> and the Shanghai Composite Index <.SSEC> took the Evergrande news in stride, both dropping 0.9% on Monday.

But the liquidation of the developer with more than $300 billion in liabilities cannot be great for sentiment, which had been showing signs of recovery since the markets bottomed last week after Beijing took steps to stabilize its markets.

A general view of residential buildings developed by China Evergrande Group, after a court ordered the liquidation of the property developer, in Beijing, China. January 29, 2024. REUTERS/Florence Lo

Even with promises of official government support, long-suffering local investors look to be taking the reprieve as a window for escape – leaving a market which is traditionally largely driven by retail money precariously adrift.

Hong Kong’s Hang Seng Index <.HIS> rose 0.8% and for it to extend the bounce from its lows investors may want to gauge whether the Hong Kong judge’s ruling on Evergrande is supported by Chinese courts.

“This is the correct market-based solution, but it will be a true test case for whether China has the stomach to see it carried out fully.  Stay tuned,” said Win Thin, global head of markets strategy at Brown Brothers Harriman in a client note.

China’s steps to stimulate its economy continue to support other Asian stock markets, with Japan’s Nikkei 225 <.N225> and South Korea’s Kospi <.KS11> both ending higher on Monday.

Japan’s December unemployment rate comes out in early trading Tuesday, which may help set the tone for markets obsessed with whether growth is strong enough for the Bank of Japan to abandon its zero-interest rate policy. The jobless rate was unchanged at 2.5% in November.

China manufacturing PMIs on Wednesday could be more important for global markets.

The yen, and the yuan, looked pretty steady against the dollar <JPY=> <CNH=D3> on Monday. U.S. stocks and Treasuries were also sturdy, after a quiet start bracing for information overload from the Fed policy statement on Wednesday that could give a stronger signal about when officials expect to start lowering interest rates.

There are also three U.S. employment reads, culminating in the all-important U.S. payrolls report for January on Friday.

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