China’s economic mire reverberated beyond the country’s domestic markets, with Asian stocks falling along with US and European futures Wednesday.
(Bloomberg) — China’s economic mire reverberated beyond the country’s domestic markets, with Asian stocks falling along with US and European futures Wednesday.
An Asian equity gauge headed toward the lowest close in more than two months as regional benchmarks’ losses accelerated after China reported the softest reading in its purchasing managers’ index since December. Hong Kong’s Hang Seng Index fell more than 2%, with a bear market on the horizon whereas South Korea’s Kospi gauge erased gains that earlier had it on course to enter a bull market.
Contracts for the S&P 500 and Euro Stoxx 50 dropped on the release of the Chinese data, which underscored concern over the strength of the recovery in the world’s second-largest economy.
The weak economic data also hurt the offshore yuan that continued its recent decline, depreciating to the weakest level versus the dollar in six months. The Australian and New Zealand currencies, which are sensitive to China’s outlook given their links to commodities trading, also slid.
Oil held its biggest decline in four weeks, partly on signs of softer demand from economies including China, and amid sufficient supply ahead of an upcoming OPEC+ meeting.
In Tuesday’s trading in the US, the Nasdaq 100 added 0.4% to extend this year’s surge to 31%. Yet it ended off its high for the day as investors assessed the artificial-intelligence hype that’s boosted the index. Nvidia Corp. hovered near $1 trillion in value after announcing several AI-related products.
AI-related software providers now stand to reap the benefits that Nvidia has laid, according to Cathie Wood, CEO and founder of Ark Investment Management. “For every dollar of hardware that Nvidia sells, software providers, SaaS providers will generate eight dollars in revenue,” she said on Bloomberg Television.
Elsewhere in currency markets, a gauge of the dollar edged higher as the greenback rose versus most of its Group-of-10 currency counterparts.
The yen continued to strengthen after Japan’s top currency official warned that Tokyo would take necessary action to support the yen. Data Wednesday showed Japan’s industrial output contracted in April for the first time in three months while retail sales fell for the first time in five months, a potential drag on the nation’s markets.
Treasuries were little changed after yields fell Tuesday from the highest levels since March that reflected hopes the Congress will pass the debt deal. Treasury rates on 3- to 10-year maturities led the move Tuesday.
The two-year yield, more sensitive than longer maturities to the outlook for Federal Reserve policy, traded around 4.43% Wednesday.
Investors also remain focused on the debt-limit deal forged by President Joe Biden and House Speaker Kevin McCarthy. The bill is heading for a House vote Wednesday after clearing a crucial procedural hurdle with just days remaining to avoid a US default. Congress is racing to pass the measure before June 5, the date when Treasury Secretary Janet Yellen has warned the US risks default.
Meanwhile, Federal Reserve Bank of Richmond President Thomas Barkin said he is looking for signs that demand is cooling to be convinced that US inflation will ease.
BlackRock Investment Institute sees the Fed nearing a pause in rate hikes. “But we don’t see the Fed coming to the rescue of a faltering economy with rate cuts later this year due to the sharp trade-off between inflation and growth,” strategists including Jean Boivin wrote in a note.
Traders also weighed the latest US economic reports, with consumer confidence dropping to a six-month low as views about the labor market and the outlook for business conditions slipped ahead of a deal to raise the debt ceiling.
Key events this week:
- US job openings, Wednesday
- Federal Reserve’s Beige Book, Wednesday
- Fed’s Patrick Harker, Susan Collins and Michelle Bowman speak at events, Wednesday
- China Caixin manufacturing PMI, Thursday
- Eurozone HCOB Eurozone Manufacturing PMI, CPI, unemployment, Thursday
- US construction spending, initial jobless claims, ISM Manufacturing, Thursday
- ECB President Christine Lagarde speaks at conference, Thursday
- Fed’s Patrick Harker speaks at webinar, Thursday
- US unemployment, nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.3% as of 6:51 a.m. London time. The S&P 500 was little changed Tuesday
- Nasdaq 100 futures fell 0.3%. The Nasdaq 100 rose 0.4%
- Euro Stoxx 50 futures fell 0.5%
- Japan’s Topix fell 1.3%
- Australia’s S&P/ASX 200 fell 1.4%
- Hong Kong’s Hang Seng fell 2.6%
- The Shanghai Composite fell 0.8%
- Euro Stoxx 50 futures fell 0.5%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.4% to $1.0695
- The Japanese yen rose 0.3% to 139.44 per dollar
- The offshore yuan fell 0.3% to 7.1125 per dollar
- The Australian dollar fell 0.4% to $0.6493
- The British pound fell 0.2% to $1.2395
Cryptocurrencies
- Bitcoin fell 2.5% to $27,084.7
- Ether fell 2% to $1,865.41
Bonds
- The yield on 10-year Treasuries declined two basis points to 3.66%
- Japan’s 10-year yield declined one basis point to 0.420%
- Australia’s 10-year yield declined eight basis points to 3.60%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold rose 0.2% to $1,962.84 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Winnie Hsu.
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