Forget China’s overbuilding fallout – it’s jobs, jobs and Fed

Jan 30 – The court-ordered liquidation of debt-laden China Evergrande was expected and hardly rattled Asian investors aside from its bondholders and property developers, meaning Japan’s employment data Tuesday and the midweek US Federal Reserve policy statement could be better attention grabbers.

China’s blue-chip CSI300 Index and the Shanghai Composite Index took the Evergrande news in stride, both dropping 0.9% on Monday. But the liquidation of the developer with more than USD 300 billion in liabilities cannot be great for sentiment, which had been showing signs of recovery since the markets bottomed last week after Beijing took steps to stabilize its markets.

Even with promises of official government support, long-suffering local investors look to be taking the reprieve as a window for escape – leaving a market that is traditionally largely driven by retail money precariously adrift.

Hong Kong’s Hang Seng Index rose 0.8% and for it to extend the bounce from its lows investors may want to gauge whether the Hong Kong judge’s ruling on Evergrande is supported by Chinese courts.

“This is the correct market-based solution, but it will be a true test case for whether China has the stomach to see it carried out fully. Stay tuned,” said Win Thin, global head of markets strategy at Brown Brothers Harriman in a client note.

China’s steps to stimulate its economy continue to support other Asian stock markets, with Japan’s Nikkei and South Korea’s Kospi both ending higher on Monday.

Japan’s December unemployment rate comes out in early trading Tuesday, which may help set the tone for markets obsessed with whether growth is strong enough for the Bank of Japan to abandon its zero-interest rate policy. The jobless rate was unchanged at 2.5% in November.

China manufacturing PMIs on Wednesday could be more important for global markets.

The yen, and the yuan, looked pretty steady against the dollar on Monday. US stocks and Treasuries were also sturdy, after a quiet start bracing for information overload from the Fed policy statement on Wednesday that could give a stronger signal about when officials expect to start lowering interest rates.

There are also three US employment reads, culminating in the all-important US payrolls report for January on Friday.

Here are key developments that could provide more direction to markets on Tuesday:

— Australia retail sales – December

— Japan unemployment – December

— US JOLTS job openings – December

— US FOMC starts two-day meeting

(Reporting by Alden Bentley, editing by Deepa Babington)