Stock Rally Cools on Gloomy China Economic Outlook: Markets Wrap

(Bloomberg) -- A stock rally cooled in Asia on Monday and the dollar rose as investors absorbed disappointing data prints and a surprise interest-rate cut from China, whose economic woes are hampering the global outlook.

An Asian share index added less than 0.5%, propped up by Japan, where the Nikkei 225 is set to erase its 2022 losses. Equity futures were mixed: S&P 500 and Nasdaq 100 contracts dipped but Europe’s edged up.

Data showed China’s July retail sales, investment and industrial output missed economists’ estimates. The central bank had earlier cut borrowing costs. China’s bond yields and the offshore yuan fell, while its bourses wavered.

Elsewhere, Treasury yields were little changed and the bond curve remained deeply inverted, pointing to worries that the Federal Reserve’s campaign of monetary tightening against high inflation will spark a US recession.

Equity markets in recent weeks have drawn succor from signs of slowing price pressures, which stirred hopes of a shift by the Fed to less aggressive rate hikes. China’s faltering economy shows many hurdles still lie ahead for a near-13% rebound in global stocks from June bear-market lows.

Markets are “focusing on the fact the US seems to have finally started a period of disinflation,” Esty Dwek, chief investment officer at Flowbank SA, said on Bloomberg Television. She added that “if China is slowing and isn’t going to pick up very much then investors really need the US to hold up.”

Elsewhere, state-owned Chinese enterprises that plan to delist from US stock exchanges slid on Monday. More firms are expected to follow their lead amid an auditing spat between the two nations. 

Oil shed about 1% in part on worries over Chinese demand. Gold retreated below $1,800 an ounce and Bitcoin hovered near $25,000.

Here are some key events to watch this week:

• Earnings include Walmart, Target, Home Depot, Tencent
• Hedge funds’ 13F filings, Monday
• Federal Reserve July minutes, Wednesday
• New Zealand rate decision, Wednesday
• UK CPI, US retail sales, Wednesday
• Australia unemployment, Thursday
• U.S. existing home sales, initial jobless claims, Conference Board leading index, Thursday
• Fed’s Esther George, Neel Kashkari speak at separate events, Thursday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.2% as of 7:05 a.m. in London. The S&P 500 rose 1.7% Friday
• Nasdaq 100 futures fell 0.2%. The Nasdaq 100 rose 2.1% Friday
• Japan’s Topix index added 0.6%
• Hong Kong’s Hang Seng index lost 0.4%
• China’s Shanghai Composite index slid 0.1%
• Australia’s S&P/ASX 200 index rose 0.5%
• Euro Stoxx 50 futures added 0.3%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%
• The euro was at $1.0246, down 0.1%
• The Japanese yen was at 133.19 per dollar, up 0.2%
• The offshore yuan was at 6.7721 per dollar, down 0.5%

Bonds

• The yield on 10-year Treasuries was steady at about 2.83%
• Australia’s 10-year yield fell seven basis points to 3.36%

Commodities

• West Texas Intermediate crude was at $91.17 a barrel, down 1%
• Gold was at $1,792.85 an ounce, down 0.5%

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