US stocks traded in a tight range on Tuesday after disparate fourth-quarter results from investment banks Goldman Sachs and Morgan Stanley, while China released 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 percent in mid-afternoon trade. Gains in real estate and consumer-focused stocks offset weakness in basic materials and financials. The tech-heavy Nasdaq Composite added 0.1 percent.
Morgan Stanley was the best performer on the S&P 500, rising 8 percent after higher net profit in its wealth management division offset a 40 percent year-over-year decline in net income. Rival Goldman Sachs, in contrast, was one of the index’s biggest fallers, dropping 7 percent after profits sank by two-thirds in the last three months of last year.
Investors on Tuesday also reacted to news that China’s GDP growth last year fell far short of Beijing’s 5.5 percent target, while the country’s population shrank for the first time in 60 years.
Despite the full year’s numbers, some investors are focused on the economic rebound delivered in the last month of 2022 after Beijing abandoned its strict zero-Covid policy.
“I don’t think people are surprised by the weakness in the annual growth numbers, it could have been worse,” said Mitul Kotecha, head of emerging market strategy at TD Securities. “The data is quite encouraging – industrial production remains better than expected despite the weakness in exports, retail sales are down but not too much, especially if you consider the impact of the Covid restrictions.”
The CSI 300 index of Shanghai- and Shenzhen-listed shares, which has risen about 17 percent since the beginning of November, held on to new results on Tuesday, closing flat while Hong Kong’s Hang Seng dipped 0.8 percent.
The easing of restrictions in China has fueled optimism that the recession expected in Europe and the US this year may not be as deep as feared.
The Zew Institute’s closely watched indicator of German economic sentiment, for example, rose for the fourth consecutive month in January, rising 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 give a material boost to global growth, commodities and Chinese stocks,” said Stephen Innes, managing partner at SPI Asset Management. “This will also mark another positive development for Europe’s growth prospects.”
“Today is probably a pause for the market more 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 markets in December by widening the target trading band for its yield curve control policy, signaling a potential shift from the country’s long-standing ultra-loose monetary regime.
Yields on Japan’s benchmark 10-year government bond rose as a result, as did the yen. Traders are not sure whether the central bank will redouble its efforts in tweaking the yield target or scrap it altogether.
In Europe, on Tuesday, the regional Stoxx Europe 600 added 0.4 percent and London’s FTSE 100 fell 0.1 percent, closing slightly below a record high. Germany’s Dax gained 0.4 percent, while the yield on the country’s 10-year Bund rose 0.01 percent to 2.09 percent.