Stock futures struggled for traction on Tuesday after some soft data from China raised concerns about the health of the global economy.
Hong Kong’s Hang Seng shed 1.5% and the Shanghai Composite dipped 0.4% after an official report over the weekend showed China’s factory activity in December eased to its slowest pace in six months .
“The PMI figures indicate a slowdown in China’s economic recovery in the last months of the year,” SPI Asset management said.
“This development is expected to pressure fiscal and monetary policymakers to take urgent action, especially after leaders committed to maintaining a pro-growth stance in 2024,” it added.
Adding to investor caution was heightened geopolitical angst as Iran said it would send a warship to the Red Sea after the U.S. navy sank some boats of the Tehran-backed Houthi militia.
Oil prices rose in response , and the move raised concerns that higher energy costs may again build inflationary pressures.
This may have contributed to a 6.4 basis point move higher in 10-year Treasury yields to 3.994% on Tuesday.
Interactive Investor said “the stage is set for further gains, certainly in terms of historical trends which suggest that the momentum could spill over into January.” But it added that “the initial tests of investors’ mettle will come thick and fast during the month.”
These potential market catalysts include the nonfarm payrolls report for December, due this coming Friday, and the fourth quarter corporate earnings season, which starts in a couple of weeks time.