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 revealed underwhelming annual gross domestic product data.

Wall Street’s blue-chip S&P 500 oscillated between small gains and losses as it reopened after a long weekend, and was down 0.2 per cent in mid-afternoon trading. Gains in real estate and consumer-focused stocks offset weakness in basic materials and financials. The tech-heavy Nasdaq Composite had added 0.1 per cent.

Morgan Stanley was the S&P 500’s top performer, rising 8 per cent after higher net revenues at its wealth management division overshadowed a 40 per cent year-on-year drop in net income. Rival Goldman Sachs, in contrast, was one of the index’s biggest fallers, dropping 7 per cent after its profits sank by two-thirds in the final three months of last year.

Investors on Tuesday also responded to news that China’s GDP growth last year fell far short of Beijing’s 5.5 per cent target, while the country’s population declined for the first time in 60 years.

Despite the weak full-year numbers, some investors focused on the economic bounce delivered in the final months of 2022 after 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.”

The CSI 300 index of Shanghai- and Shenzhen-listed shares, which has climbed about 17 per cent since the start of November, held on to its recent gains on Tuesday, closing flat while Hong Kong’s Hang Seng dipped 0.8 per cent.

The easing of restrictions in China has added to optimism that widely-expected recessions in Europe and the US this year may not be as deep as initially feared.

The Zew Institute’s closely watched indicator of German economic sentiment, for example, 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.

“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.”

“Today is probably a pause for markets rather than anything else,” Kotecha at TD Securities 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.

In Europe on Tuesday, the regional Stoxx Europe 600 added 0.4 per cent and London’s FTSE 100 dipped 0.1 per cent, closing slightly below its record 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.

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