FILE PHOTO – People walk past an electronic screen showing Japan’s Nikkei stock price index at a conference hall in Tokyo, Japan June 14, 2022. Portal/Issei Kato
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- Nikkei rises, S&P 500 futures fall
- PBOC cuts interest rates, China data misses forecasts significantly
- Eyes on Fed Minutes, US Retail Sales, Earnings
SYDNEY, Aug 15 (Portal) – Asian stocks were mixed on Monday after China’s central bank cut interest rates as a raft of economic data missed forecasts and underscored the need for more stimulus to support the world’s second-largest economy.
Both retail sales and industrial production rose less-than-expected in July, contributing to a disappointing number of new bank loans.
The rate cut helped cushion the blow somewhat, keeping Chinese blue chips (.CSI300) steady while yuan and bond yields fell. Continue reading
“These are further signs that the post-Shanghai lockdown growth spurt is fading rapidly,” said Alvin Tan, strategist at RBC. “Monetary policy is losing traction, except possibly on the exchange rate, with exports being the only bright spot in the economy.”
MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) was flat after rising 0.9% last week.
Japan’s Nikkei (.N225) rose 1.1% as data showed the economy grew an annualized 2.2% in the second quarter, just slightly below estimates. Continue reading
Investors remain curious whether Wall Street can continue its rally as hopes that US inflation has peaked will be tested this week by likely hawkish comments from the Federal Reserve.
“Wednesday’s FOMC minutes should reinforce the hawkish tones of recent Fed speakers that interest rates and inflation are far from over,” warned Tapas Strickland, economics director at NAB.
Markets are still implying around a 50% chance that the Fed will hike 75 basis points in September and that rates will rise to around 3.50-3.75% by the end of the year.
Hopes of a soft economic landing are also being tested on their health by US retail sales data, which is expected to show a sharp slowdown in spending in July.
There’s also a risk that earnings from major retailers, including Walmart (WMT.N) and Target (TGT.N), will be littered with warnings of a drop in demand.
Geopolitical risks remain high for a two-day trip by a delegation of US lawmakers to Taiwan. Continue reading
EUROSTOXX 50 futures were up 0.4% and FTSE futures were up 0.5%. S&P 500 futures and Nasdaq futures are both down about 0.2% after last week’s gains.
However, the S&P index is nearly 17% above its mid-June lows and just 11% above its all-time highs, amid bets that the worst of inflation is over, at least in the United States.
PEAK INFLATION
“The leading indicators we’ve been watching are supportive of moderation, with supply pressures easing, demand weakening, money supply collapsing, prices falling and expectations falling,” analysts at BofA said.
“Key components of headline inflation, including food and energy, are also at an inflection point. Both Wall Street and Main Street now expect inflation to moderate.”
The bond market still appears to have doubts that the Fed can pull off a soft landing as the yield curve is still heavily inverted. Two-year yields are 3.26%, 42 basis points higher than 10-year bonds.
Those returns have supported the US dollar, although it fell 0.8% against a basket of currencies last week as risk sentiment improved.
The euro stayed at $1.0249 after recovering 0.8% last week, despite balking at resistance around $1.0368. Against the yen, the dollar stabilized at 133.23 after losing 1% last week.
“We remain of the view that the dollar rally will resume shortly,” argued Jonas Goltermann, senior economist at Capital Economics.
“It will take a lot more good news on inflation before the Fed changes course.
The dollar’s decline gave gold, which was trading around $1,794 an ounce, some breathing space after gaining 1% last week.
Oil prices eased as China’s disappointing data fueled concerns over global fuel demand.
The head of the world’s largest exporter Saudi Aramco said he was ready to ramp up production as production resumes at several offshore platforms in the Gulf of Mexico after a brief outage last week.
Brent fell 99 cents to $97.16 a barrel, while US crude fell 89 cents to $91.20 a barrel.
Reporting by Wayne Cole; Edited by Sam Holmes and Raju Gopalakrishnan
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