The Asia-Pacific (APAC) region experienced a mixed trading session, with stocks largely rangebound despite encouraging economic data from China. Investors appeared cautious following an uninspiring handover from Wall Street, balancing regional updates and global market trends.

China’s GDP and Activity Data Beat Expectations

Markets in Hong Kong and mainland China saw choppy trading. The Hang Seng Index and Shanghai Composite Index exhibited only mild gains despite upbeat economic indicators from China.

China’s economy grew by 5.4% year-on-year in Q4, surpassing expectations of 5.0%. The full-year growth for 2024 was reported at 5.0%, slightly above the anticipated 4.9%. Additionally, Industrial Production and Retail Sales figures exceeded forecasts, offering a glimmer of optimism about the recovery of the world’s second-largest economy.

However, the market reaction remained subdued, reflecting investor concerns over the sustainability of growth and the broader macroeconomic environment.

Currency Markets: DXY and USD/JPY Lack Direction

The U.S. Dollar Index (DXY) traded without clear conviction, influenced by dovish comments from Federal Reserve Governor Christopher Waller. USD/JPY lingered near its lowest level in almost a month, while Antipodean currencies (AUD and NZD) showed muted responses to China’s positive economic data, indicating restrained market sentiment.

Middle East Update: Israel Agrees to Gaza Hostage Deal

Geopolitical developments added complexity to the global narrative. Israeli media reported that Israel agreed to a Gaza hostage deal, with the cabinet scheduled to meet on Friday for further discussions. Notably, Israeli National Security Minister Itamar Ben-Gvir announced his intention to resign from the government if the Gaza ceasefire deal is approved. These developments could have broader implications for regional stability and investor sentiment.

European Markets Eye a Flat Open

European equity futures signaled a subdued start to Friday’s session, with Euro Stoxx 50 futures unchanged after Thursday’s 1.5% rally in the cash market. Traders are likely adopting a wait-and-see approach as they digest recent gains and look ahead to upcoming economic and corporate updates.

What to Watch: US Data and Earnings

The day ahead offers several key events and data points:

• US Economic Indicators: Investors will be closely monitoring the release of US Industrial Production data and the Congressional Budget Office (CBO) Budget and Economic Outlook for insights into the state of the economy.
• Central Bank Commentary: Remarks from ECB’s Cipollone may provide further clues about the European Central Bank’s policy direction.
• Corporate Earnings: Major earnings releases from SLB, Fastenal, Truist, State Street, and Citizens will provide additional signals about corporate performance and sector-specific trends.

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With global markets grappling with a mix of optimism from strong Chinese data and caution due to geopolitical uncertainties and central bank rhetoric, traders and investors will likely tread carefully as the week concludes.