Asian equities trimmed gains after China reported worse-than-estimated data that added to concern the world’s second-largest economy is losing momentum. The offshore yuan weakened.
(Bloomberg) — Asian equities trimmed gains after China reported worse-than-estimated data that added to concern the world’s second-largest economy is losing momentum. The offshore yuan weakened.
Mainland stocks swung to losses and those in Hong Kong pared their advance after the reports showed consumer spending and industrial activity both grew at a slower pace in April than expected. The data weighed on sentiment that was previously propped up by a 4% gain in the Nasdaq Golden Dragon China Index on Monday, when filings showed money manager Michael Burry boosted his bullish bets on e-commerce giants JD.com Inc. and Alibaba Group Holding Ltd.
“This set of data confirms what the credit data/imports/inflation numbers suggest all along — that domestic demand is weak, further monetary policy easing is required at some point and that yuan could remain under pressure,” said Fiona Lim, senior FX strategist at Malayan Banking Bhd. in Singapore
The broader MSCI Asian equity gauge still posted gained, with Japan’s Topix index headed for the highest close since 1990. Solid fundamentals and expectations for structural changes “justify a bullish stance” on Japan’s equities, Goldman Sachs Group Inc. said.
The dovish bias by the Bank of Japan is also positive for Japanese equities and “earnings have been increasing relative to other jurisdictions,” said Chris Weston, head of research at Pepperstone Group Ltd. “There’s a lot working for it at the moment from a technical and fundamental perspective,” he said on Bloomberg Television. “We still like the case that’s going on in Japan right now.”
South Korean equities also rallied, supported by chip stocks on the potential merge between Kioxia Holdings Corp. and Western Digital Corp. Australian stocks declined.
US equity futures edged lower before a meeting between President Joe Biden and House Speaker Kevin McCarthy Tuesday. The US stock market gained Monday amid mixed signals sent by both factions in the debt-ceiling talks. Treasury Secretary Janet Yellen reiterated her department may run out of cash as soon as June 1 unless Congress raises or suspends the federal debt limit.
The dollar and Treasuries both edged higher, while the Aussie weakened after the China data. Reserve Bank of Australia minutes showed officials weighed the risk of upside surprises to inflation amid a tight labor market in their surprise decision to hike rates this month.
More Volatility
UBS Private Wealth Management expects to see more volatility in the markets, especially on the short-end of the Treasury curve, as deadline approaches on the debt-ceiling dispute. “If you’re someone who has cash on the sideline, right now we are recommending that you go ahead and you lock in those improved bond yields,” financial adviser Sarah Ponczek said on Bloomberg Television.
Meanwhile, data showed New York manufacturing slid the most since April 2020. This week’s figures will likely underscore more economic weakness, emboldening the Federal Reserve’s dovish voices even though inflation has failed to reassure, according to Anna Wong at Bloomberg Economics.
JPMorgan Chase & Co.’s Marko Kolanovic joined a chorus of Wall Street strategists Monday in warning that the US debt-ceiling impasse is yet another headwind threatening the outlook for equity markets. Morgan Stanley’s Mike Wilson delivered a similar warning on the debt-ceiling deadline, noting the bank’s clients said the issue is unlikely to be resolved without some near-term volatility.
Elsewhere, oil climbed and gold was little changed.
Key events this week:
- Eurozone GDP, Tuesday
- US retail sales, industrial production, business inventories, Tuesday
- Fed speakers include Cleveland’s Loretta Mester, New York’s John Williams, Atlanta’s Raphael Bostic and Chicago’s Austan Goolsbee, Tuesday
- Eurozone CPI, Wednesday
- BOE Governor Andrew Bailey delivers keynote speech, Wednesday
- US housing starts, Wednesday
- US initial jobless claims, Conference Board leading index, existing home sales, Thursday
- Japan CPI, Friday
- ECB President Christine Lagarde participates in panel at Brazil central bank conference, Friday
- New York Fed’s John Williams speaks at monetary policy research conference in Washington; Fed Chair Jerome Powell and former chair Ben Bernanke to take part in panel discussion, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.2% as of 11:11 a.m. Tokyo time. The S&P 500 rose 0.3% Monday
- Nasdaq 100 futures were little changed. The Nasdaq 100 rose 0.6%
- Japan’s Topix index rose 0.3%
- Hong Kong’s Hang Seng Index rose 0.4%
- China’s Shanghai Composite Index fell 0.3%
- Australia’s S&P/ASX 200 Index fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0872
- The Japanese yen was little changed at 135.99 per dollar
- The offshore yuan fell 0.1% to 6.9684 per dollar
- The Australian dollar fell 0.2% to $0.6685
Cryptocurrencies
- Bitcoin fell 1.2% to $27,024.04
- Ether fell 1% to $1,808.16
Bonds
- The yield on 10-year Treasuries declined two basis points to 3.49%
- Japan’s 10-year yield declined 0.5 basis point to 0.4%
- Australia’s 10-year yield advanced two basis points to 3.45%
Commodities
- West Texas Intermediate crude rose 0.6% to $71.55 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Jason Scott and Chester Yung.
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