Asian stocks and currencies edged lower as investors weighed the implications of slowing imports by China on its economic recovery.
Benchmarks fell from Hong Kong to Australia, with Japan defying the downturn. While an 8.5% gain in China’s April exports beat economists forecasts, imports had plunged a worse-than-expected 7.9% to raise questions about future demand. The yuan weakened.
Euro Stoxx 50 futures rose, but contracts for the S&P 500 and Nasdaq 100 edged lower in Asia. The tech-heavy Nasdaq 100 had gained 0.3% Monday as AI-capable chipmakers Advanced Micro Devices and Nvidia Corp. rose alongside Google-parent Alphabet.
“The main data point moving the markets are the import numbers and the really large downside surprise,” said Galvin Chia, FX strategist at NatWest Markets. ‘‘Lately markets have been viewing China’s economic data through a pretty bearish lens, and this shows once again that the import demand component is quite weak.”
Still, shares of Chinese banks and brokers surged amid speculation of more policy support for the financial sector. A call by the country’s regulators on lower commissions for housing sales and rentals also boosted sentiment, driving developers higher.
The yen strengthened against all its Group-of-10 peers. Bank of Japan Governor Kazuo Ueda said earlier the central bank will end its yield-curve-control policy if it reaches its 2% price goal. A Bloomberg dollar index was little changed though the reserve currency advanced against most emerging-market peers in Asia.
Treasuries rose after declining Monday as investors considered what it would take to reverse the Federal Reserve’s path on rates. Bond trading desks are bracing for as much as $35 billion of corporate debt sales this week, while Apple Inc. kicked off a $5.25 billion sale.
Investors will be watching US President Joe Biden and congressional leaders as they are set to discuss the debt-ceiling issue. Meanwhile, consumer-inflation data Wednesday may provide further clues on the Fed’s path and set the tone for equities.
Debt impasse
For the time being, the debt ceiling impasse is offering a short-term yield opportunity, according to Asia Pacific strategists at Saxo Capital Markets, including Charu Chanana.
“Further concerns on credit tightening or delays in debt ceiling solution could continue to drive up short-term Treasury yields, potentially in three months, as investors hedge against a possible default,” they wrote in a note.
Meanwhile, swaps traders still look optimistic the Fed is prepared to pause in June as contracts suggest interest-rate cuts will start as early as the July meeting, with at least two quarter-point cuts by year-end.
“With the market convinced of a pause at the June meeting, it seems the barrier for a hike is high and this could limit the moves in interest rate futures, which would impact the USD, NAS100 and gold,” Chris Weston, head of research at Pepperstone Group, wrote in a note.
Elsewhere in markets, oil fell as wildfires in Canada reduced supplies, offsetting concerns over lackluster global fuel demand. Gold gained and Bitcoin held below $28 000.
Key events this week:
- US President Joe Biden scheduled to meet with congressional leaders on debt limit, Tuesday
- New York Fed President John Williams speaks to Economic Club of New York, Tuesday
- US CPI, Wednesday
- China PPI, CPI, Thursday
- UK BOE rate decision, industrial production, GDP, Thursday
- US PPI, initial jobless claims, Thursday
- Group of Seven finance minister and central bank governors meet in Japan, Thursday
- US University of Michigan consumer sentiment, Friday
- Fed Governor Philip Jefferson and St. Louis Fed President James Bullard participate in panel discussion on monetary policy at Stanford University, Friday.
Some of the main moves in markets:
Stocks
- S&P 500 futures were unchanged as of 6:30 a.m. London time. The S&P 500 was little changed Monday
- Nasdaq 100 futures were little changed. The Nasdaq 100 rose 0.25%
- Euro Stoxx 50 futures rose 0.2%
- Japan’s Topix index rose 1.2%
- Hong Kong’s Hang Seng Index fell 0.5%
- China’s Shanghai Composite Index rose 0.5%
- Australia’s S&P/ASX 200 Index fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro fell 0.1% to $1.0992
- The Japanese yen rose 0.1% to 134.91 per dollar
- The offshore yuan was little changed at 6.9263 per dollar
- The Australian dollar was little changed at $0.6785
- The British pound was little changed at $1.2616
Cryptocurrencies
- Bitcoin was little changed at $27,574.53
- Ether was little changed at $1,840.67
Bonds
- The yield on 10-year Treasuries declined one basis point to 3.50%
- Japan’s 10-year yield advanced 1.5 basis points to 0.425%
- Australia’s 10-year yield advanced six basis points to 3.46%
Commodities
- West Texas Intermediate crude fell 0.4% to $72.84 a barrel
- Spot gold rose 0.4% to $2 028.30 an ounce
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