Most Asian stocks fell as investors focused on patches of weakness in China’s economic data even as the overall picture was solid.
(Bloomberg) — Most Asian stocks fell as investors focused on patches of weakness in China’s economic data even as the overall picture was solid.
Shares on mainland China eked out gains, while benchmarks in Hong Kong, South Korea and Australia traded in the red. China’s economy grew at a faster pace than expected last quarter as consumers ramped up spending, but the recovery was uneven with industrial activity relatively subdued.
The yuan jumped following the data release, before giving back some of the advance as caution resurfaced. The dollar was steady after gains of the past two days. Government bond yields in Australia and New Zealand rose in the slipstream of moves Treasuries overnight.
Treasury yields fell slightly in Asia trade, with yield on the two-year note just below 4.2%. Richmond Fed President Thomas Barkin said he wants to see more evidence that US inflation is easing back to the central bank’s goal of 2%. New York state manufacturing activity unexpectedly expanded in April for the first time in five months as new orders and shipments snapped back.
Europe and the US are going into a slight slump, and China is probably seeing growth coming in, Eva Lee, head of Greater China equities at UBS Global Wealth Management said on Bloomberg Television. It is an ideal scenario for people to think about “maybe reallocate a little bit more weighting onto China versus last year or last few years,” she said.
The possibility of further Federal Reserve policy tightening had lifted Treasury yields and constrained US stocks on Monday, with the S&P 500 erasing losses in afternoon trading and the tech-heavy Nasdaq 100 underperforming major equity benchmarks.
The Australian dollar rose after minutes of the Reserve Bank’s April meeting showed members discussed a quarter point hike before deciding on a pause. Meanwhile, Indonesia’s central bank is expected to keep its benchmark unchanged later Tuesday.
A gauge of cross-asset volatility remained at 14-month low, reflecting a growing assurance that the worst of the banking turmoil and US rate hikes may be over. The VIX Index, another volatility measure, sat below 17, its lowest since the start of last year.
Still, US bank earnings on Monday didn’t entirely relieve investor nervousness that the sector can quickly bounce from turmoil that roiled several lenders earlier this year, as a so-called earnings recession in the world’s biggest economy looms.
“The risk-reward for equities does not look attractive into the second half in light of risk-free hurdle rate at 5%,” a team of strategists at JPMorgan Chase & Co., including Marko Kolanovic, wrote in a note. “The main disconnect revolves around the hopes of a soft landing with inflation coming down quickly.”
Elsewhere, oil rose on growth data from China and gold ticked higher.
Key events this week:
- US housing starts, Tuesday
- Goldman Sachs and Bank of America release first-quarter earnings, Tuesday
- Fed’s Michelle Bowman discusses digital currency, Tuesday
- Eurozone CPI, Wednesday
- Fed releases Beige Book, Wednesday
- Fed’s John Williams gives a speech, Wednesday
- Fed’s Austan Goolsbee is interviewed on NPR, Wednesday
- China loan prime rates, Thursday
- Eurozone consumer confidence, Thursday
- US initial jobless claims, existing home sales, index of leading economic indicators, Thursday
- ECB issues report on March policy meeting, Thursday
- Fed’s Christopher Waller speaks at cryptocurrency-focused event, Thursday
- Fed’s Patrick Harker speaks on “monetary policy and housing”, Thursday
- Fed’s Loretta Mester discusses the economic and policy outlook, Thursday
- Fed’s Raphael Bostic discusses regional and national economic conditions, Thursday
- Fed’s Michelle Bowman and Lorie Logan speak at event, Thursday
- PMIs for Eurozone, Friday
- Japan CPI, Friday
- Fed’s Lisa Cook discusses economic research at an event, Friday
Some of the main moves in the market:
Stocks
- S&P 500 futures were unchanged as of 12:16 a.m. Tokyo time. The S&P 500 rose 0.3%
- Nasdaq 100 futures were little changed. The Nasdaq 100 was little changed
- Japan’s Topix index rose 0.8%
- Hong Kong’s Hang Seng Index fell 0.8%
- China’s Shanghai Composite Index was little changed
- Australia’s S&P/ASX 200 Index fell 0.3%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.1% to $1.0938
- The Japanese yen was little changed at 134.43 per dollar
- The offshore yuan was little changed at 6.8778 per dollar
- The Australian dollar rose 0.3% to $0.6723
Cryptocurrencies
- Bitcoin rose 0.1% to $29,498.61
- Ether rose 0.2% to $2,081.26
Bonds
- The yield on 10-year Treasuries declined one basis point to 3.59%
- Australia’s 10-year yield advanced 11 basis points to 3.48%
Commodities
- West Texas Intermediate crude rose 0.4% to $81.18 a barrel
- Spot gold rose 0.3% to $2,000.78 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Jason Scott, Abhishek Vishnoi, Yvonne Man and David Ingles.
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