Asia-Pacific markets fall as recession fears grow, China vows to stabilize economy

Oil futures rose in Asian morning trade as optimism over China’s reopening, which has led to a recovery in demand, outweighed recession fears.

Brent crude futures rose 1.16% to $79.96 a barrel, while US West Texas Intermediate futures rose 1.18% to $75.17 a barrel.

China recently planned to increase flights to resume travel during the upcoming Lunar New Year holiday, Caixin reported last week.

The report said officials have drawn up plans to target nearly 90% of pre-pandemic levels by the end of January.

– Jihe Lee

Shares in Hong Kong-listed Macao Casino fell in the Asian morning session despite winning 10-year concessions to operate their integrated resorts.

A concession is essentially an operating agreement with the government, which in turn licenses the operators.

Wynn Macau fell 8% and MGM China lost about 12%. Sands China also fell by 4%, and Galaxy Entertainment by 3%.

The moves come as media reports show a rise in deaths in Beijing and as Shanghai has ordered schools to close, dampening investor sentiment on China’s reopening path.

– Jihe Lee, Contessa Brewer

China will prioritize stabilizing its economy and intensifying policy adjustments to meet key targets set for 2023, Xinhua news agency reported last week, marking the end of the annual Central Economic Work Conference.

“Proactive fiscal policy needs to be strengthened to be effective with a better mix of instruments, including fiscal deficits, special purpose bonds and interest subsidies,” the report said.

Hao Hong of Grow Investment Group said that while he expects supportive policies such as interest rate cuts, he doesn’t think it will become his own version of quantitative easing. QE is a policy that the US Federal Reserve has undertaken in the past to stimulate economic activity by increasing the amount of cash.

“While some prominent economists argue for Chinese QE, the recent Central Economic Work Conference suggests a more measured approach,” he said. “We believe that the expansion of liquidity will be structural and targeted rather than a blanket easing.”

– Jihe Lee

After a rough couple of years for Chinese tech stocks, investors are now hoping the worst is behind them.

What’s next for the failed sector? Goldman Sachs shares its outlook on Chinese tech and reveals how investors can trade the sector in 2023.

Pro subscribers can read more here.

— Zavier Ong

San Francisco Federal Reserve President Mary Daley said Friday that she welcomed the latest news on inflation, but that it was not enough to change her view of where policy should be headed.

October and November CPI readings were “good news” but “now we’re seeing nothing but hope in the inflation data, and I’m relying on evidence, not hope. So I’m hoping we’re on a good track, but I won’t be sure until I see repeated evidence that inflation will indeed return to the 2 percent path in the coming years,” Daly said during a talk hosted by the American Enterprise Institute. :

“We are far from our goal of price stability,” he added.

Earlier this week, the Fed raised its borrowing rate by half a percentage point, the seventh hike of the year, bringing the funds rate to a target range of 4.25%-5%.

Daly, a nonvoting member of the Federal Open Market Committee this year, said his own expectations for where interest rates are headed are likely higher than current market prices. Dali votes again in 2024.

– Jeff Cox

According to the International Energy Agency, the expansion of renewable energy is predicted to grow exponentially over the next five years.

The IEA predicted earlier this month that solar and wind power would grow fivefold, equal to the clean energy capacity installed over the past 20 years.

With this prospect of a shift to renewables in mind, CNBC Pro checked out stocks that could offer opportunities to investors in the sector.

CNBC Pro subscribers can read more here.

— Ganesh Rao

According to Jeremy Siegel, a finance professor at the Wharton School of Business at the University of Pennsylvania, the Federal Reserve’s plans to continue hiking interest rates next year raise the possibility of a very difficult recession ahead.

“I think the Fed is making a terrible mistake,” he told CNBC’s “Squawk on the Street” on Friday. “Their plan, their dot plot, is too dense. Inflation is mostly over, despite the president. [Jerome] Powell characterizes it.’

According to Siegel, the central bank should refrain from further hikes or keeping interest rates high next year.

“Talk of going higher and staying higher in 2023, I think, will guarantee a very sharp decline,” he said.

– Samantha Subin

UBS raised its forecast for China’s 2023 gross domestic product to 4.9% from 4.5% previously, according to its chief China economist Wang Tao, citing the country’s earlier and faster reopening.

Wang said the firm expected a weaker fourth-quarter GDP figure for 2022, cutting its full-year forecast to 2.7% from 3.1%, pointing to weaker growth in November with the latest surge in Covid cases.

The firm added that the Central Economic Working Conference is likely to prioritize stabilizing growth as well as supportive macro policies for the coming year.

“We expect fiscal policy to remain accommodative, with a small increase in the core deficit and a new special LG [local government] bonds, monetary and credit policy with continued high liquidity but unlikely to taper any additional policy,” Wang said in a note.

– Jihe Lee