Asian stocks dropped on concern over China’s stuttering economy and signs the Federal Reserve will keep interest rates higher for longer to tame inflation.
(Bloomberg) — Asian stocks dropped on concern over China’s stuttering economy and signs the Federal Reserve will keep interest rates higher for longer to tame inflation.
Benchmark indexes fell across the region with some of the biggest declines in Hong Kong, South Korea and Australia. The MSCI China Index is on course to erase all its gains made since last month’s Politburo meeting. The losses follow a drop in US equities Tuesday when robust economic data added to concern the Fed will keep rates elevated for longer.
China’s economic woes remained in focus with a report showing new-home prices fell for a second month in July, adding to fears over the ailing property sector. JPMorgan Chase & Co. cut its full-year growth forecast for the country to 4.8% from 5% after a raft of disappointing data for July while Macquarie Group lowered estimates for the yuan.
Investors are becoming more negative about China “despite the fact that it’s extremely cheap,” Kieran Calder, head of equity research for Asia at Union Bancaire Privée, said on Bloomberg Television. While the market obviously is waiting for a stimulus bazooka, signals from the government show that they only are taking piecemeal approach, he said.
The offshore yuan was steady after the People’s Bank of China sought to boost market sentiment with a stronger-than-expected currency fixing and its largest injection of short-term cash to the financial system since February.
In the earnings pipeline Wednesday is Tencent Holdings Ltd. The company is expected to record its fastest pace of revenue growth in more than a year, fueling optimism the internet sector is emerging from a historic trough despite Chinese economic turmoil.
Fed Rates
US stocks had dropped Tuesday after retail sales beat forecasts, bolstering the case for further Fed tightening. That message was reinforced by Minneapolis Fed President Neel Kashkari, who said that while inflation has been coming down, “it’s still too high.”
Major currencies were mixed. The kiwi gained after the Reserve Bank of New Zealand left its key rate unchanged as economists predicted, but said forecasts now show a small chance of another rate hike.
Treasuries edged higher in Asia. Two-year yields had briefly spiked above 5% Tuesday before reversing course, while yields on the 10- and 30-year debt rose to the highest levels since October.
While investors navigate a hawkish Fed and a slowdown in China, a devaluation in Argentina and Russia’s emergency rate hike on Tuesday to stem the ruble’s slide added to the risk-off sentiment.
On the economic front, the UK reports inflation and the euro area will publish growth figures. Later, minutes from the Fed’s July policy meeting are due.
Elsewhere, oil slipped for a third day, while gold edged higher.
Key events this week
- Eurozone industrial production, GDP, Wednesday
- UK CPI, Wednesday
- US FOMC minutes, housing starts, industrial production, Wednesday
- US initial jobless claims, US Conf. Board leading index, Thursday
- Eurozone CPI, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 1:04 p.m. Tokyo time. The S&P 500 fell 1.2%
- Nasdaq 100 futures rose 0.1%. The Nasdaq 100 fell 1.2%
- Japan’s Topix fell 0.8%
- Australia’s S&P/ASX 200 fell 1.4%
- Hong Kong’s Hang Seng fell 1.4%
- The Shanghai Composite fell 0.2%
- Euro Stoxx 50 futures fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0908
- The Japanese yen was little changed at 145.49 per dollar
- The offshore yuan was little changed at 7.3240 per dollar
- The Australian dollar was little changed at $0.6450
Cryptocurrencies
- Bitcoin was little changed at $29,195.73
- Ether was little changed at $1,826.81
Bonds
- The yield on 10-year Treasuries declined one basis point to 4.20%
- Japan’s 10-year yield was unchanged at 0.630%
- Australia’s 10-year yield declined three basis points to 4.23%
Commodities
- West Texas Intermediate crude fell 0.2% to $80.83 a barrel
- Spot gold rose 0.1% to $1,904.34 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Stephen Kirkland.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.