Gains in China’s Markets Amid Deflation Concerns

As the global markets reopened following the Lunar New Year holiday, expectations were high for China’s markets to showcase strong performance. However, gains have been modest, with China’s central bank opting not to cut rates further, which could limit downward pressure on the yuan amidst looming deflation concerns.

Meanwhile, Japan’s Nikkei Index is witnessing a significant uptick, nearing its all-time high from 1989. This contrasts sharply with China’s blue-chip index, which remains down from its peaks.

The Chinese market’s cautious stride, with the blue-chip index (.CSI300) making a modest 0.5% gain on top of its pre-Lunar New Year (LNY) rally, reflects broader economic dynamics, including a 47% surge in tourism revenues during the holiday compared to the previous year. Despite this, the index has seen a 1% decline this year and a 43% drop from its 2021 highs. On the other hand, Japan’s Nikkei (.N225) has soared nearly 15% this year, underscoring a divergent trend in Asian markets.

In the context of global tech and its impact on market valuations, Nvidia stands out as a company under the spotlight, with its upcoming results being a test of its high market valuation, boasting a price-to-earnings ratio of 96. The outcome of Nvidia’s earnings report is pivotal, with options indicating a significant potential swing, which will be closely watched by investors.

Additionally, the European and U.S. economic data, including flash PMIs and Federal Reserve speakers’ insights, will be detrimental for markets this week, with particular attention on inflation expectations and wage data in the Eurozone.

For more information, read the full article on Reuters.