Asian shares steady in holiday-thinned trade; weak Japan GDP cools rally

Asian shares were quietly consolidating recent hefty gains on Monday as holidays made for thin trading, and dismal economic data out of Japan took some of the heat out of that booming market.

China, South Korea, Taiwan and the United States were among the centres off, ​leaving currencies, commodities and bonds all becalmed.

The major data of the week are not out until Friday when ​surveys of global manufacturing hit and the US reports gross domestic product for the fourth quarter. Median forecasts are for annualised growth of 3.0 per cent, down ‌from 4.4 per cent the previous quarter but still solid.

 

Japan on Monday reported its economy grew a miserly 0.1 per cent annualised in the December quarter, far below the 1.6 per cent gain forecast as government spending dragged on activity.

The disappointing figures underline the tough task ahead for Prime Minister Sanae Takaichi and should support her push for more aggressive fiscal stimulus.

Perhaps with that in mind, investors pushed Japan's Nikkei up 0.2 per cent, following a 5 per cent rise last week. MSCI's broadest index of Asia-Pacific shares outside Japan firmed 0.1 per cent.

South Korea's tech-heavy market surged 8.2 per cent last week, while Taiwan climbed almost 6 per cent for the week.

"Our fear in Asia is that if the mega-cap technology companies announce a pause in capital expenditure, that might lead to a sharp correction in memory stocks that have rallied sharply in markets like Korea this year," said Nick Ferres, chief investment officer at Vantage Point.

"While rotation is likely to favour emerging markets, we are becoming increasingly cautious on memory stocks in Korea and Taiwan following their exceptional performance and re-rating."

More capex means fewer buybacks

For Europe, EUROSTOXX 50 futures were flat and DAX futures added 0.2 per cent.

S&P 500 futures gained 0.2 per cent, while Nasdaq futures ‌rose 0.1 per cent. Earnings season continues, with the star attraction being Walmart, which will offer colour on consumer spending trends after a disappointing December for retail sales.

The retailer's stock has jumped 20 per cent this year, taking its market capitalization above $1 trillion and making it by far the biggest company by market value in the consumer staples sector, which is up 15 per cent in 2026.

Defensive stocks have benefited from a rotation out of tech amid concerns about the huge cost of AI capex and the disruptive effect of AI competition on sectors such as software, which has shed 24 per cent in market value in the past three months.

Hyperscaler capex plans have ballooned to $660 billion, $120 billion higher than at the start of the earnings season.

Analysts at Goldman Sachs noted that as capex has surged, S&P 500 buybacks have dropped by 7 per cent on a year ago.

"This marks the ​third consecutive quarter of stagnation," they wrote in a note. "We expect the increasing scarcity of free cash flows and buybacks will strengthen the premium for companies focused ‌on returning cash flows to shareholders."

There is no lack of cash flowing into bond markets as money exited stocks and US economic data underpinned the case for more rate cuts from the Federal Reserve.

Yields on two-year Treasuries fell to 3.408 per cent on Friday, the lowest close since mid-2022. Futures imply a 68 per cent chance the ​Fed will cut in June ‌and have 62 basis points of easing priced in for the year.

The drop in yields pulled the dollar index down 0.8 per cent last week to 96.890, with most of the ‌losses against a rebounding Japanese yen.

The dollar was a shade firmer at 152.94 yen, having sunk 2.9 per cent last week, while the euro was flat at $1.1870.

The dollar also shed 1 per cent on the Swiss franc last week, while the euro slid under 0.9100 francs for the first time since 2015.

The relentless rise of the ‌franc has markets ​on alert for ​possible intervention from the Swiss National Bank given inflation is already down at 0.1 per cent, near the very bottom of its 0 per cent to 2 per cent target band.

In commodity markets, gold eased 0.5 per cent to $5,014 an ounce, having swung wildly in recent weeks as some investors were squeezed out of leveraged positions. [GOL/]

Oil ‌prices were steady as investors digested a ​Reuters report that OPEC is leaning towards a resumption in oil output increases from April. [O/R]

Brent was flat at $67.74 a barrel, while US crude barely budged at $62.87 per barrel.