Chinese shares in Hong Kong fell as concerns grew over the world’s second-largest economy after the latest trade data showed extended weakness. The dollar advanced.
(Bloomberg) — Chinese shares in Hong Kong fell as concerns grew over the world’s second-largest economy after the latest trade data showed extended weakness. The dollar advanced.
The Hang Seng China Enterprises Index fell 1.6%, the worst-performing stock gauge in the region. The rest of Asian equities were broadly stronger. The dollar gained on concern that China may be relaxing its grip on the yuan, which spurred risk aversion. Treasuries rallied.
China’s exports fell for a third straight month in July amid a slump in global demand, while imports plunged as domestic pressures also undermine the economy’s recovery. The data added to concerns as signs of deflationary pressures continue to hit Chinese businesses amid weakening growth.
A gauge of the dollar strength gained as signs that China may be relaxing its grip on the yuan spurred risk aversion.
The People’s Bank of China set Tuesday’s yuan reference rate at 7.1565 per dollar, revising an earlier fixing in the morning when it had indicated a stronger fixing of 7.1365. The Chinese central bank has been supporting the currency, which helps anchor other foreign exchange rates in Asia.
“The fix above 7.15 certainly allows more room for USD/CNY to rise,” said Fiona Lim, senior FX strategist at Malayan Banking Bhd. It’s a “sign that the cap of 7.30 for USD/CNY spot could be lifted,” she added.
Contracts for US stocks slipped after the S&P 500 on Monday halted a four-day drop and the Dow Jones Industrial Average saw its biggest advance in more than seven weeks. Optimism in Wall Street was offset by the latest comments from a Federal Reserve official that pointed to more rate hikes to tame inflation.
A report by Moody’s Investors Service lowering credit ratings for 10 small and midsize US banks also partially impacted sentiment with the rating agency saying it may downgrade major lenders.
Treasuries steadied in Asia after yields on the 10-year on Monday resumed an increase that drove them last week to the highest since November. Fed Governor Michelle Bowman said Monday that additional hikes “will likely be needed” and that sent yields on the two-year to climb before paring some of its advance.
Bulging sales of Treasuries are about to deliver a major test of investor demand and determine whether a selloff has room to run as the market braces for the biggest round of refunding auctions since last year. The bond market has to absorb a combined $103 billion of 3-, 10- and 30-year auctions before the week is out — up $7 billion from the May slate.
The yen led declines against the dollar among Group-of-10 currencies. Data earlier showed that growth in Japanese workers’ wages unexpectedly slowed in June, clouding prospects for the Bank of Japan’s sustainable inflation goal.
Meanwhile, the release of the consumer price index from the US due later this week will provide investors with clues on the Federal Reserve’s policy outlook. Fed Bank of New York President John Williams cited the necessity to keep policy restrictive “for some time” — while noting rate cuts may be warranted next year if inflation slows.
Morgan Stanley’s Michael Wilson said that Fitch Ratings’ downgrade of US government debt last week and the ensuing selloff in the bond market suggests that “investors should be ready for potential disappointment” on economic and earnings growth.
A clear majority of investors expects a US recession before 2024 is out, leading them to view the current bull market in stocks as ephemeral and to favor long-term US Treasuries. That’s the takeaway from the latest Markets Live Pulse survey, which showed that roughly two-thirds of the 410 respondents anticipate a downturn in the world’s biggest economy by the end of next year.
Survey respondents appear to be looking past the economy’s current resilience and anticipating further damaging ripple effects from the Fed’s cumulative tightening.
Focus returned to company earnings on Monday. Berkshire Hathaway Inc. hit a record as its results beat estimates. Amazon.com Inc. rose after a news report it will meet with the Federal Trade Commission to avoid an antitrust lawsuit. Tesla Inc. slid as its chief financial officer stepped down in a surprise shakeup at Elon Musk’s company. Apple Inc. notched its longest losing streak this year.
Elsewhere, oil edged higher ahead of US figures on the outlook and stockpiles as the global market tightened amid OPEC+ supply cuts. Gold was slightly lower.
Key events this week:
- US wholesale inventories, trade, Tuesday
- Philadelphia Fed President Patrick Harker speaks, Tuesday
- China CPI, PPI, money supply, new yuan loans and aggregate financing, Wednesday
- India rate decision, Thursday
- US initial jobless claims, CPI, Thursday
- Atlanta Fed President Raphael Bostic pre-recorded remarks for employment webinar, Thursday
- UK industrial production, GDP, Friday
- US University of Michigan consumer sentiment, PPI, Friday
Some of the main moves in markets:
- S&P 500 futures fell 0.2% as of 12:46 p.m. Tokyo time. The S&P 500 rose 0.9%
- Nasdaq 100 futures fell 0.3%. The Nasdaq 100 rose 0.9%
- Japan’s Topix rose 0.4%
- Australia’s S&P/ASX 200 rose 0.2%
- Hong Kong’s Hang Seng fell 1.3%
- The Shanghai Composite was little changed
- Euro Stoxx 50 futures were little changed
- The Bloomberg Dollar Spot Index rose 0.3%
- The euro fell 0.2% to $1.0984
- The Japanese yen fell 0.6% to 143.30 per dollar
- The offshore yuan fell 0.3% to 7.2221 per dollar
- The Australian dollar fell 0.3% to $0.6550
- Bitcoin was little changed at $29,173.96
- Ether rose 0.1% to $1,827.89
- The yield on 10-year Treasuries declined three basis points to 4.06%
- Japan’s 10-year yield advanced 1.5 basis points to 0.635%
- Australia’s 10-year yield declined 12 basis points to 4.08%
- West Texas Intermediate crude rose 0.2% to $82.11 a barrel
- Spot gold fell 0.1% to $1,934.32 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Zhu Lin.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.