Losses in Chinese shares dragged down Asia’s equities as investors assessed whether the nation’s reopening story still has room to run amid economic and geopolitical headwinds.
(Bloomberg) — Losses in Chinese shares dragged down Asia’s equities as investors assessed whether the nation’s reopening story still has room to run amid economic and geopolitical headwinds.
The Shanghai Shenzhen CSI 300 Index fell for a fifth day, while the Hang Seng China Enterprises Index headed for its lowest close in five weeks. Traders cite geopolitical tensions such as the US plans last week to limit investments in key parts of China’s economy, while Chinese President Xi Jinping and other top leaders have highlighted risks the economy still faces.
Some better-than-expected Chinese data in recent days hasn’t been enough to bolster sentiment.
“People question the accuracy of the macro data, as bottom-up corporate earnings and guidance remain soft,” Bank of America Corp. strategists including Winnie Wu wrote in a research note. “We expect the debate on the bull/bear case to continue, and market may only get more clarity by June/July.”
US equity futures declined after the S&P 500 closed just 0.1% higher on Monday and the tech-heavy Nasdaq 100 slipped 0.2%. That extended to seven the number of trading days when the two indexes have both moved less than 1%. Australia’s financial markets are shut for a holiday.
A Bloomberg gauge of the dollar dropped for a fourth day as signs of slowing US growth damped bets on Federal Reserve interest-rate hikes. Treasuries extended gains after 10-year yields slid eight basis points Monday, the biggest one-day decline since March.
Markets are now pricing in the peak for US interest rates in June, and then a decline to end the year below 4.5%.
The small shifts in Fed projections underscore the lack of direction at the start of a busy week for economic data and corporate earnings. Data published Monday showed US manufacturing data was weaker than economists forecast, while uncertainty over the debt ceiling persisted. Later this week, US GDP data is forecast to reveal slower growth, and the so-called core PCE deflator, the Fed’s preferred inflation gauge, is expected to show price growth cooled.
“The Fed is going to continue to feel they can be restrictive as long as the economy continues to be this robust,” Shana Sissel, president and CEO of Banrion Capital Management, said on Bloomberg Television. “A lot of hedge funds are positioning because they think rates are going to increase. I’m in that same camp.”
The CBOE VIX index of equity volatility remained near the 17-month low reached last week, but JPMorgan Chase & Co. strategist Marko Kolanovic said that may spell trouble for stock investors as it gives a false sense of calm.
South Korea’s economy grew more than forecast in the first quarter, according to data released Tuesday, giving the central bank breathing room to assesses the impact of policies on growth and inflation.
First Republic Bank plans to cut as much as a quarter of its workforce and shrink its balance sheet after deposits fell more than expected. UBS Group AG shares climbed after takeover target Credit Suisse AG reported outflows that were lower than some analysts predicted. Microsoft Corp., Meta Platforms Inc. and Amazon.com Inc. report later this week.
In commodities, oil steadied and gold rose.
Key events this week:
- US new home sales, consumer confidence, Tuesday
- Australia CPI, Wednesday
- Sweden rate decision, Wednesday
- Eurozone economic, consumer confidence, Thursday
- US initial jobless claims, GDP, Thursday
- Bank of Japan meets on interest rates, Friday
- Euro-area GDP, Friday
- US personal income, Friday
Earnings highlights:
- Tuesday: Pepsi, General Motors, General Electric, McDonalds, Microsoft, UBS, UPS
- Wednesday: Boeing, Meta, Hilton
- Thursday: Amazon, American Airlines, Intel, Mastercard, Southwest Airlines, Hershey, Honeywell, Barclays
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.3% as of 1:02 p.m. Tokyo time. The S&P 500 rose 0.1%
- Nasdaq 100 futures fell 0.3%. The Nasdaq 100 fell 0.2%
- Japan’s Topix index rose 0.4%
- South Korea’s Kospi index fell 1.9%
- Hong Kong’s Hang Seng Index fell 1.6%
- China’s Shanghai Composite Index fell 0.3%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1054
- The Japanese yen was little changed at 134.37 per dollar
- The offshore yuan fell 0.2% to 6.9144 per dollar
- The Australian dollar fell 0.3% to $0.6679
Cryptocurrencies
- Bitcoin fell 0.5% to $27,332.48
- Ether fell 0.6% to $1,828.42
Bonds
- The yield on 10-year Treasuries declined two basis points to 3.47%
- Japan’s 10-year yield advanced one basis point to 0.475%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold rose 0.2% to $1,993.31 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson.
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