Asia opens cautiously after gloomy data from China: markets close

(Bloomberg) — A gauge of Asian shares struggled to find direction on Monday as traders weighed the extent of the decline in China’s economy after worse-than-expected activity data landed over the weekend.

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Australia’s benchmark rose in early trade and U.S. futures showed incremental gains after the S&P 500 posted its best week of the year on Friday. Shares in Hong Kong are poised for declines after a series of weak data from China on Saturday left traders wondering whether authorities will initiate strong stimulus to support the economy. Japan and mainland China were closed for the holiday.

China’s factory output, consumption and investment slowed more than forecast for August, while the unemployment rate unexpectedly hit a six-month high. That came after China’s central bank signaled late on Friday that it would step up its fight against deflation and prepare more policies to revive the economy after credit data showed private confidence remained weak.

Sentiment will be hurt in Asia on Monday as “house price declines accelerate, with very little supportive evidence coming from the measures that policymakers have implemented,” said Tony Sycamore, an analyst at IG in Sydney. “The continued deterioration of the real estate sector spells trouble for the rest of the Chinese economy” by the end of the year.

The dollar was lower after what the Federal Bureau of Investigation called an apparent assassination attempt against former President Donald Trump. US Treasuries will not trade during Asian hours due to the Japanese holiday.

Monday’s cautious open comes ahead of a series of data and central bank decisions that are likely to set the direction of markets for the rest of the year and into early 2025. A reading on eurozone inflation is needed as officials debate the pace of policy easing, followed by an expected rate cut by the Federal Reserve and policy decisions by the Bank of England and the Bank of Japan.

Treasury yields fell for a second week in a row, with two-year notes closing at a two-year low on Friday as bets resumed on a 50-basis-point rate cut by the Fed, about 110 basis points of interest reductions at the end of the year. according to data compiled by Bloomberg.

“It’s a big week ahead” and clearly the 25 or 50 basis point conundrum needs to be resolved, said Martin Whetton, head of financial markets strategy at Westpac Banking Corp. from Sydney. “At least a conciliatory discount should be expected, given the volume of data and the starting point of the policy, and this should justify the forward prices in the market.”

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With most major Asian markets closed on Monday, traders are likely to be cautious ahead of regional trade data and Bank Indonesia’s policy decision, which comes just hours before the Fed. Global funds have been snapping up Southeast Asian assets as the prospect of lower interest rates and attractive valuations offer the promise of outsized returns.

If the Fed’s rate cut is not recession-led and growth outside the U.S. falters, “then the U.S. dollar is more likely to lag behind while other growth- and rate-sensitive currencies outperform, such as Korean Won, Malaysian Ringgit. and Thai baht,” said Christopher Wong, a currency strategist at Oversea-Chinese Banking Corp. from Singapore.

Key events this week:

• ECB speakers, including Vice President Luis de Guindos and Chief Economist Philip Lane, on Monday

• US empire manufacturing, Monday

• Trade with Singapore, Tuesday

• The Federal Reserve begins a two-day meeting on Tuesday

• US Business Inventories, Industrial Production, Retail Sales, Tuesday

• CPI Canada, Tuesday

• Indonesia’s rate decision on Wednesday

• South African Retail Sales CPI Wednesday

• UK CPI, Wednesday

• Euro zone CPI on Wednesday

• US rate decision on Wednesday

• The decision on Brazil’s rate on Wednesday

• Unemployment in Australia on Thursday

• New Zealand GDP Thursday

• Taiwan rate decision on Thursday

• Norway tariff decision on Thursday

• UK rate decision on Thursday

• South African tariff decision on Thursday

• China’s prime loan rates on Friday

• Japan CPI, interest rate decision, Friday

• ECB President Christine Lagarde speaks on Friday

• Bank of Canada Governor Tiff Macklem speaks on Friday

Some of the main movements in the markets:

Stocks

• S&P 500 futures were little changed as of 9:23 a.m. Tokyo time

• Hang Seng futures fell 0.2%

• Australia’s S&P/ASX 200 rose 0.5%

• Euro Stoxx 50 futures rose 0.7%

Coins

• The Bloomberg Dollar Spot Index fell 0.1%

• The euro rose 0.1% to $1.1091

• The Japanese yen rose 0.2 percent to 140.55 per dollar

• The offshore yuan was little changed at 7.0946 per dollar

• The Australian dollar rose 0.1% to $0.6711

Cryptocurrencies

• Bitcoin fell 1.5% to $58,911.12

• Ether was down 2.2% at $2,311.61

BONDS

commodities

• West Texas Intermediate crude rose 0.4% to $68.90 a barrel

• Spot gold rose 0.1% to $2,580.98 an ounce

This story was produced with the help of Bloomberg Automation.

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