(Bloomberg) — Asian stocks were under pressure as traders returned their focus to China’s efforts to halt its economic malaise after markets in the US were shut for the US Labor Day holiday.
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Hong Kong shares fell after Monday’s rally that saw the Hang Seng Index jump almost 3% on the government’s latest property support. Mainland China shares also slipped. Developer Country Garden Holdings Co. is in spotlight after the company is reported to plan payment extensions of seven yuan bonds. It is also entering the final hours of a grace period to pay interest on dollar bonds.
China’s Caixin PMI composite and services data came in below estimates, but remained above 50, which suggests a slight recovery from its post-pandemic torpor.
Stocks traded lower in South Korea, where inflation accelerated much faster than estimates in August on the back of higher energy costs, reinforcing the case for the central bank to keep the door open to further policy tightening to rein in prices.
Shares also declined in Japan and Australia, where the Reserve Bank of Australia is set to keep rate unchanged for the third straight month in a meeting later Tuesday.
“With inflation expectations still elevated, the central bank is likely to maintain a hawkish bias — and keep it through the second half of 2023,” according to James McIntyre at Bloomberg Economics. “We see the RBA starting to cut rates in the first quarter of 2024.”
The dollar steadied, while Treasuries were slightly lower across tenors as cash trading resumed. Australian bonds also fell ahead of the central bank’s meeting, with yield on the three-year rising two basis points and that on the 10-year up three basis points.
While Treasury markets were closed on Monday, bond yields inched higher in the euro zone, with rate-setters seemingly divided on whether policy needs to be tightened further this month, given above-forecast inflation and sluggish growth. In a speech in London, European Central Bank President Christine Lagarde avoided signaling whether policymakers will raise or hold interest rates next week.
“Central banks have eased their tightening bias, but they still have a tightening bias,” Shane Oliver, chief economist at AMP Capital, said on Bloomberg Television. “The volatility will remain high at the very least, but if we do get a pullback, I would see that as a buying opportunity because the inflationary pressures globally are easing and then ultimately will take pressure off central banks.”
Oil continued to trade near the highest level since mid-November after a surge driven by supply cuts from OPEC+ that have tightened the market. Crude has rallied by about a quarter since late June as a result of supply reductions, which have been led by Saudi Arabia and Russia.
Key events this week:
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Australia current account, rate decision, Tuesday
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Eurozone S&P Global Eurozone Services PMI, PPI, Tuesday
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US factory orders, Tuesday
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ECB President Christine Lagarde chairs panel focused on central banks and international sanctions at ECB Legal Conference, Tuesday
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Australia GDP, Wednesday
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Eurozone retail sales, Wednesday
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Germany factory orders, Wednesday
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US trade, Wednesday
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Canada rate decision, Wednesday
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Bank of England Governor Andrew Bailey testifies to the UK parliament’s Treasury Select Committee, Wednesday
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Federal Reserve issues Beige Book economic survey, Wednesday
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Boston Fed President Susan Collins speaks on the economy at New England Council, Wednesday
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China trade, forex reserves, Thursday
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Eurozone GDP, Thursday
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US initial jobless claims, Thursday
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Bank of Canada Governor Tiff Macklem to speak on the Economic Progress Report, Thursday
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New York Fed President John Williams participates in moderated discussion at the Bloomberg Market Forum, Thursday
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Atlanta Fed President Raphael Bostic speaks on economic outlook at Broward College, Thursday
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Japan GDP, Friday
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France industrial production, Friday
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Germany CPI, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures fell 0.2% as of 10:53 a.m. Tokyo time
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Nasdaq 100 futures fell 0.1%
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Japan’s Topix fell 0.4%
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Australia’s S&P/ASX 200 fell 0.5%
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Hong Kong’s Hang Seng fell 1.3%
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The Shanghai Composite fell 0.5%
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Euro Stoxx 50 futures were little changed
Currencies
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The Bloomberg Dollar Spot Index rose 0.1%
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The euro was little changed at $1.0786
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The Japanese yen fell 0.1% to 146.65 per dollar
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The offshore yuan fell 0.3% to 7.2942 per dollar
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The Australian dollar fell 0.5% to $0.6431
Cryptocurrencies
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Bitcoin fell 0.2% to $25,775.01
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Ether fell 0.3% to $1,624.03
Bonds
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The yield on 10-year Treasuries advanced two basis points to 4.20%
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Japan’s 10-year yield advanced 1.5 basis points to 0.655%
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Australia’s 10-year yield advanced three basis points to 4.12%
Commodities
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West Texas Intermediate crude rose 0.2% to $85.72 a barrel
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Spot gold fell 0.4% to $1,935.54 an ounce
This story was produced with the assistance of Bloomberg Automation.
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