China’s stock markets have not experienced a significant boost after the Lunar New Year holiday. 

Although they made modest gains on the first few days back, China’s main indexes are still down for 2023. 

The central bank’s decision not to cut interest rates during the holiday weekend aimed to limit downward pressure on the yuan but also removed hopes for additional stimulus. 

However, analysts believe policymakers still have room for further policy action in China as deflation looms.

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• China markets muted after Lunar New Year; Nikkei surged 15% in 2023

• Nvidia earnings loom as critical test for tech sector momentum.

• Central banks walk a tightrope between inflation and growth fears.

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China Markets Struggle to Gain Momentum After New Year Holiday

The Shanghai Composite and blue-chip indexes have increased by around 0.5% since reopening, but they remain down 1% and 43%, respectively, from 2021 highs. 

Meanwhile, Japan’s Nikkei 225 has surged nearly 15% year-to-date, approaching 1989 all-time highs. 

At a market capitalization of 683 trillion yen ($4.55 trillion), the Nikkei 225 is worth approximately the same as Nvidia and Apple combined. 

This pales in comparison to the S&P 500’s $42 trillion capitalization, suggesting that there is room for further gains.

Many Japanese companies trade at discounts to book value, while the Nikkei’s market cap barely exceeds the cash reserves held by local firms. 

This implies that Japanese stocks remain attractively valued despite solid gains.

Nvidia’s upcoming earnings are eagerly anticipated amid sky-high valuations and a 96x trailing price-to-earnings ratio. 

The chip giant has added a staggering $570 billion in market cap in 2023, accounting for over 25% of S&P 500 gains. 

Options suggest that Nvidia shares could swing 11% in either direction on results. 

However, 42% profit margins and $18 billion cash protect the downside. 

Nvidia also benefits from powerful momentum as rising prices lure buyers.

The central bank’s consumer inflation expectations and wage data will be closely watched for signs of excess. 

Multiple Fed officials will also speak this week before the last meeting minutes. 

Markets have pared rate cut hopes on ugly inflation data, implying just 36% odds of a May cut. 

Less than 100 basis points of easing is priced in for 2023 after removing two 25 basis point cuts.

To summarize, China’s markets lack momentum, but policymakers still have room to stimulate growth. 

Japanese stocks are catching up to global peers, while richly-valued Nvidia faces a key earnings test. 

Europe awaits data amid central bank warnings on wages, while Fed minutes will remind of still-high inflation.