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Stocks trade higher as China seeks to prop up consumers

Asian markets were mostly higher on Monday, buoyed by gains in Japan and Korea, while mainland Chinese stocks lagged despite new government measures to boost consumption. European and US stocks ended last week on a positive note, recovering from earlier losses. This week, investors will closely watch interest rate decisions from the Federal Reserve, Bank of Japan, Swiss National Bank, and Bank of England and their accompanying press conferences for updates on how some of the world’s largest central banks plan to navigate an increasingly unpredictable international trade environment.

Date
Auteur
Shane Strowmatt, LGT
Temps de lecture
5 minutes

China Shanghai
© Shutterstock

Stocks in the Asia-Pacific region were mostly higher on Monday, with the notable exception of mainland Chinese stocks, which were under pressure despite a new set of government measures meant to prop up consumption and stock markets. China's State Council introduced a "special action plan" on Sunday aimed at enhancing domestic consumption by increasing incomes and establishing a childcare subsidy scheme. The plan also proposes stabilising the stock market and addressing long-term structural issues such as wage stagnation and inadequate social safety nets and comes after years of weak consumer demand due to COVID-19 disruptions and a prolonged property slump. Hong Kong’s Hang Seng Index gained 0.9%, whereas mainland China’s CSI 300 was trading 0.3% lower.

China retail sales rise amid tariff pressures

In macroeconomic data, China's retail sales increased by 4% in January-February, up from a 3.7% rise in December, as policymakers focus on boosting domestic consumption to offset US tariff impacts. Despite this, the urban jobless rate climbed to 5.4%, and industrial output growth slowed to 5.9% from 6.2% in December. Policymakers are prioritising domestic demand expansion and maintaining a 5% growth target for 2025 amid export challenges and a continuing property crisis.

Record high Japanese bond yields

Elsewhere in the Asia-Pacific region, stock markets were trading higher to start the week and bond yields shot up. Japan’s Nikkei 225 was trading 1.1% higher, while yields on 40-year Japanese Government Bonds hit a record high of above 3%, with 30-year bonds reaching a 19-year high. Korea’s Kospi rose 1.5%. Australia’s S&P/ASX 200 was up 0.8% on Monday.

All eyes on central banks

This week, central bank interest rate decisions will be in the spotlight with the Federal Reserve (Wednesday), Bank of Japan (Wednesday), Swiss National Bank (Thursday), and Bank of England (Thursday) all set to announce their latest policy moves. The Fed’s decision, along with its updated economic projections and press conference, will be closely watched for signals about how the central bank plans to navigate the erratic US trade policy. Meanwhile, market participants will also scrutinise inflation data from several countries with Consumer Price Index releases due from Canada (Tuesday), the euro area (Wednesday) and Japan (Friday).

US markets rebound after turbulent week

US stock markets recovered on Friday, driven by optimism that a government shutdown might be avoided. The Dow Jones Industrial Average rose by 1.7% to 41,488.19 points, although it recorded a 3.1% loss for the week. The S&P 500 increased by 2.1% to 5638.94 points, and the Nasdaq 100 climbed by 2.5% to 19,704.64 points. The CBOE Volatility Index - a gauge of market fear - plummeted on Friday, after spiking earlier in the week.

US consumer sentiment plunges in March

In US macroeconomic data, US consumer sentiment dropped sharply to 57.9 in March from 64.7 in February, according to the University of Michigan on Friday. Inflation expectations for the next 12 months rose to 4.9%, up from 4.3% in February, amid concerns over President Donald Trump's tariffs sparking a trade war. Financial markets have been rattled by the tariff escalation, contributing to the decline in sentiment.

German inflation steady at 2.3% in February

Germany's inflation rate remained stable at 2.3% in February 2025, unchanged from January, according to data released on Friday. Food prices surged by 2.4% year-on-year, accelerating from January's 0.8% increase, while energy prices fell by 1.6%, continuing the trend from the previous month. Service prices saw a significant rise of 3.8%, driven by higher costs in transport and social services, whereas the core inflation rate, excluding food and energy, stood at 2.7%. European stock indices advanced on Friday with Germany’s DAX leading regional gains. The DAX rose 1.9% and the Euro Stoxx 50 increased by 1.4%.

UK economy contracts by 0.1% in January

The UK economy unexpectedly shrank by 0.1% in January, according to data released by the Office for National Statistics on Friday. This contraction, driven by declines in the industrial and construction sectors, contrasts with the market’s expectations of mild growth. While the services sector grew by 0.1%, it was insufficient to offset the overall decline. The economy had expanded by 0.4% in December, helping to avoid stagnation in the last quarter of 2024.

Corporate and economic calendar

Corporate news in focus: There is no major corporate news scheduled today.

Economic data in focus: Italian Consumer Price Index (10:00), Bundesbank monthly report (12:00), US Empire State Manufacturing Index (13:30), US retail sales (13:30).

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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