Asian Stocks Slip, Chinese Shares Pull Back Amid Economic Concerns

Asian stocks pared earlier gains, while European equity index futures dropped, as concerns about geopolitical tensions and market pullbacks weighed on investor sentiment. Mainland China’s stock index turned negative, and Hong Kong-listed technology shares dropped from a near three-year high.

The U.S. dollar strengthened against most of its Group-of-10 counterparts, with Bloomberg’s gauge of the greenback snapping a three-day losing streak. U.S. Treasury yields fell as trading resumed on Tuesday following the Presidents’ Day holiday. Federal Reserve Governor Christopher Waller noted that recent economic data supported keeping interest rates steady until inflation shows more substantial progress.

Chinese stocks had surged earlier in the session, following a key meeting between President Xi Jinping and business leaders on Monday. The meeting raised expectations for increased support for the private sector and was seen by some analysts as a signal that Beijing may ease its years-long crackdown on private businesses. This surge came amid a broader rally in Chinese shares, which have added over $1 trillion in market value since the breakthroughs in artificial intelligence by companies like DeepSeek.

Despite this optimism, analysts caution that a sustainable bull market is far from certain. “It’s a good rebound, but before it really evolves into a multi-year rising trend, a lot needs to be done,” said Hao Hong, a partner and economist at Grow Investment Group, in an interview with Bloomberg TV. He emphasized the need for a sustainable growth model for a lasting market rally.

The meeting with Xi drew prominent Chinese business leaders from industries including semiconductor manufacturing, electric vehicles, and artificial intelligence. The summit signaled Beijing’s shift towards a more supportive stance toward private companies, especially as Washington ramps up its campaign of global tariffs.

In bond markets, Chinese government bond yields rose, with the 10-year yield climbing by 4 basis points to 1.73%, the highest level since December. Tight liquidity conditions in China and a rally in stocks reduced demand for government debt.

Meanwhile, Federal Reserve Governor Waller indicated that if inflation behaves similarly to 2024, policymakers might resume interest rate cuts later this year.

In Australia, stocks continued to slide following a rate cut by the Reserve Bank of Australia. The Australian dollar briefly gained before losing steam after the central bank expressed caution about future rate cuts despite the reduction in the official cash rate.

Oil prices held steady amid developments within OPEC+, as delegates suggested a delay in the planned output restoration. Additionally, Ukrainian drones attacked a crude-pumping station in Russia, adding further volatility to the market.

Gold prices held onto gains following a 0.5% rise on Monday. Goldman Sachs raised its year-end gold price target to $3,100 per ounce, citing central bank buying and inflows into gold-backed exchange-traded funds.