Asian shares mixed as China retail data disappoints

Shares around the world nudged lower on Monday on soft economic numbers from China and Europe and as surging bond yields challenged equity valuations, at the start of a week packed with central bank meetings and major economic data.

Figures from China showed retail sales rose just 3.0 per cent in November, compared with a year earlier, well below market forecasts of 4.6 per cent and evidence of the need for much more aggressive stimulus. Industrial production was much as expected, while house prices were still falling, though at a slower pace.

The data showed China "is not yet out of the woods", said Erin Xin, Greater China economist at HSBC in a note, adding she expected China to ease monetary policy further and expand support for consumption and the property sector, though details may not come until 2025.

China's blue chip index eased 0.5 per cent, having dropped more than two per cent last Friday.

Over the weekend, an official at China's central bank said it had room to further cut the reserve requirement ratio, the amount of cash banks must hold as reserves, though credit numbers out last week showed past easing had done little to boost borrowing.

Hong Kong's Hang Seng index fell 0.88 per cent to 19,795.49 while Japanese markets ended a choppy session lower amid caution before the Bank of Japan's two-day policy meeting starting on Wednesday.

The Nikkei finished marginally lower at 39,457.49, while the broader Topix index closed 0.30 per cent lower at 2,738.33.

Seoul stocks ended slightly lower after President Yoon Suk Yeol was impeached on the weekend. The Kospi average settled 0.22 per cent lower at 2,488.97, giving up early gains due to profit taking after four days of gains. Samsung Electronics, Hyundai Motor and Kia dropped one to three per cent while SK Hynix jumped 2.2 per cent.

Australian stocks ended lower, dragged down by technology and mining stocks. The benchmark S&P/ASX 200 shed 0.56 per cent to close at 8,249.50, while the broader All Ordinaries index fell 0.66 per cent to 8,494.

Across the Tasman, New Zealand's benchmark S&P/NZX-50 index edged up by 0.34 per cent to 12,797.33.

European stocks also nudged down, off 0.1 per cent, not helped by soft business activity data from Germany, which showed a sixth straight month of contraction, and France. That left MSCI's world share index a fraction lower. US share futures held steady.

Investors were also digesting ratings agency Moody's unexpectedly downgrading France on Friday.

The action came a few hours after French President Emmanuel Macron appointed veteran centrist Francois Bayrou as the country's fourth prime minister in a year.

French government bonds slightly underperformed German bunds in early trading Monday.

The big events of the week are central bank meetings, and market pricing shows rate-setters in the United States and Sweden are expected to cut, while policymakers in Japan, Britain and Norway hold steady.

The Federal Reserve will lead the pack on Wednesday with markets pricing a 96 per cent probability it will cut rates by 25 basis points to a new range of 4.25 per cent to 4.50 per cent.

More important will be any guidance on future easing, including the "dot plot" forecasts of Fed members for rates over the next couple of years.

"We look for the updated dots to signal a median expectation for three cuts next year, down from four in the September projection," said JPMorgan economist Michael Feroli.

"The median longer-run dot, which was 2.875 per cent in September, we see moving up to three per cent or maybe even 3.125 per cent.

"That said, given the vagaries of trade and other policies next year, the signal from the dots may be even less useful than ordinarily."

Investors have been steadily scaling back expectations of how far rates may fall, in part reflecting solid economic news and speculation US President-elect Donald Trump's plans for tax cuts and tariffs would expand government borrowing while putting upward pressure on inflation.

Futures imply only two more cuts next year and rates bottoming out at around 3.80 per cent, much higher than just a few months ago. That outlook took a heavy toll on the Treasury market last week, where longer-dated yields recorded their largest weekly rise this year.

Yields on 10-year notes were up at 4.38 per cent, having climbed 24 basis points last week alone, and threatening to breach a major bear target at 4.50 per cent.

Bitcoin was also in the spotlight, surging to a record high above $US106,000 as it extended gains on bets Trump's return will usher in a cryptocurrency-friendly regulatory environment.

In currency markets, the US dollar has been underpinned by rising yields. That has put the squeeze on a raft of emerging market currencies, forcing intervention in some cases.

The dollar likewise held firm on the yen at 153.7, having jumped almost 2.5 per cent last week, while the euro looked wobbly at $US1.0512.

Gold was at $US2,657 an ounce, and oil prices came off three-week highs, having been supported by expectations that additional sanctions on Russia and Iran could tighten supplies.

Brent futures were down 38 cents at $US74.12 a barrel.

with DPA