By Wayne Cole
SYDNEY, Feb 16 (Reuters) – 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 U.S. reports gross domestic product for the fourth quarter. Median forecasts are for annualised growth of 3.0%, down from 4.4% the previous quarter but still solid.
Japan on Monday reported its economy grew a miserly 0.1% annualised in the December quarter, far below the 1.6% 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%, following a 5% rise last week. MSCI’s broadest index of Asia-Pacific shares outside Japan firmed 0.1%.
South Korea’s tech-heavy market surged 8.2% last week, while Taiwan climbed almost 6% 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%.
S&P 500 futures gained 0.2%, while Nasdaq futures rose 0.1%. 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% 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% 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% 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% 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 U.S. economic data underpinned the case for more rate cuts from the Federal Reserve.
Yields on two-year Treasuries fell to 3.408% on Friday, the lowest close since mid-2022. Futures imply a 68% 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% 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% last week, while the euro was flat at $1.1870.
The dollar also shed 1% 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%, near the very bottom of its 0% to 2% target band.
In commodity markets, gold eased 0.5% 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 U.S. crude barely budged at $62.87 per barrel.
(Reporting by Wayne Cole; Editing by Sonali Paul)
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