Asia Stocks Fall on China Weakness, Crude Rallies: Markets Wrap

(Bloomberg) — Chinese stocks were among the hardest hit across broadly lower equity markets in Asia on Monday in a further sign of cautious sentiment. Treasuries crept lower and oil gained for a second day.

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Equity benchmarks in mainland China and Hong Kong fell with the Hang Seng index tumbling as much as 1.6%. A Bloomberg Intelligence index of Chinese property developers dropped as much as 6.4%, heading for its worst session in nine months.

The decline for Chinese developers follows news on Friday that China Evergrande Group had canceled a creditor meeting slated to begin Monday. Fresh strains for developers appeared to overcome pockets of optimism Friday, when an index of US-listed Chinese companies was bolstered by news Washington and Beijing were forming working groups to discuss economic and financial issues.

Shares also dropped in Australia and South Korea. A region-wide equity gauge fell for the fifth time in six days. Japanese equities and US stock futures both gained. Oil climbed as hedge funds piled on bets tightening supplies will see a resumption of the rally after a pause last week.

Stock losses in Asia followed a 0.2% decline for the S&P 500 on Friday to cap its worst week since March. Nasdaq 100 futures climbed 0.4% Monday after the underlying gauge ended little changed Friday, supported by gains in Apple Inc. as its latest iPhones and watches went on sale.

Shutdown

Treasuries will be in focus this week, with a number of Fed officials speaking at public events. Investors will also be watching the release of monthly inflation data in the US, and assessing the likely impact of a possible US government shutdown.

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“Sentiment still remains fragile with higher-for-longer messages reverberating through the markets,” Redmond Wong, market strategist for Saxo Capital Markets HK Ltd, wrote in a research note. A potential US government shutdown and the United Auto Workers strike “could further dent sentiment this week,” he said.

The dollar traded in a narrow range against its major peers, while yen was little changed near its weakest level this year. Japan’s currency slipped last week as the Bank of Japan maintained its ultra-easy monetary policy settings.

Inflation Fears

Traders are still very concerned about inflation and the path of policy amid the recent oil rally and the Fed’s signal that rates are not going to come down any time soon, according to Fawad Razaqzada, a market analyst at City Index and Forex.com in London.

“It is far too early to say the markets have bottomed, as fundamentally nothing has changed,” Razaqzada said.

Two Fed officials said at least one more rate hike is possible and that borrowing costs may need to stay higher for longer for the central bank to ease inflation back to its 2% target. While Boston Fed President Susan Collins said further tightening “is certainly not off the table,” Governor Michelle Bowman signaled that more than one increase will probably be required.

The Treasury 10-year yield may rise to 4.75% before softer risk sentiment and tighter financial conditions push it lower into year-end, according to strategists at Bank of America Corp.

Elsewhere in markets, Bitcoin declined more than 1%, while gold edged lower.

Key events this week:

• Minneapolis Fed President Neel Kashkari in Q&A, Monday

• ECB’s Francois Villeroy de Galhau speaks on monetary policy, Monday

• US new home sales, Conference Board consumer confidence, Tuesday

• ECB’s Philip Lane speaks on monetary policy, Tuesday

• China industrial profits, Wednesday

• US durable goods, Wednesday

• Eurozone economic confidence, consumer confidence, Thursday

• US initial jobless claims, GDP, Thursday

• Fed Chair Jerome Powell town hall meeting with educators while Richmond Fed President Tom Barkin, Chicago Fed President Austan Goolsbee make speeches, Thursday

• Eurozone CPI, Friday

• Japan unemployment, industrial production, retail sales, Tokyo CPI, Friday

• US consumer spending, wholesale inventories, University of Michigan consumer sentiment, Friday

• ECB President Christine Lagarde speaks, Friday

• New York Fed President John Williams speaks, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.3% as of 1:32 p.m. Tokyo time. The S&P 500 fell 0.2% Friday

• Nasdaq 100 futures rose 0.4%. The Nasdaq 100 fell 0.1% Friday

• Japan’s Topix rose 0.4%

• Australia’s S&P/ASX 200 fell 0.2%

• Hong Kong’s Hang Seng fell 1.2%

• The Shanghai Composite fell 0.4%

• Euro Stoxx 50 futures fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0649

• The Japanese yen was little changed at 148.39 per dollar

• The offshore yuan fell 0.1% to 7.3077 per dollar

Cryptocurrencies

• Bitcoin fell 1.3% to $26,163.89

• Ether fell 0.8% to $1,578.2

Bonds

• The yield on 10-year Treasuries advanced two basis points to 4.46%

• Japan’s 10-year yield declined two basis points to 0.725%

• Australia’s 10-year yield declined three basis points to 4.31%

Commodities

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Rita Nazareth and Brett Miller.

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