Passers-by walk past an electric panel displaying Japan’s Nikkei share average outside a brokerage firm in Tokyo, Japan April 18, 2023. REUTERS/Issei Kato
- Housing woes cause Chinese stocks to falter ahead of data
- Rising bond yields push the dollar as high as 145.22 yen
- European stocks moved little
- Ruble weakens above 100 per dollar
SYDNEY, Aug 14 (Reuters) – Stocks fell on Monday as China’s housing woes reinforced the case for stimulus, although Beijing appeared to be deaf to the calls, while rising government bond yields buoyed the dollar, briefly above closely watched levels climbed from 145 yen.
There was plenty to watch on the geopolitical front, too, as Argentina’s voters punished the two main political powers in a primary on Sunday, knocking a rocking, libertarian underdog candidate into first place.
A day earlier, a Russian warship fired warning shots at a cargo ship in the southwestern Black Sea, heralding a new phase in the war that could affect oil and food prices. The Russian ruble weakened above the psychologically important 100 per US dollar mark on Monday for the first time since March, with President Vladimir Putin’s economic adviser blaming easy monetary policy.
MSCI’s world index (.MIWD00000PUS) lost 0.2%, with most of the losses attributed to Asian equities. The main ex-Japan index (.MIAPJ0000PUS) fell 1.7% after falling 2% last week. Japan’s Nikkei (.N225) lost 1.3%.
Europe’s broad STOXX 600 benchmark (.STOXX) was flat, but the mining-heavy and China-exposed FTSE lagged, falling 0.2%. (.FTSE)
“A crisis in China’s real estate sector is a story the market has heard before, and not one that usually comes with a happy ending for stocks,” said Russ Mold, investment director at AJ Bell.
Troubles at China’s largest private real estate developer Country Garden (2007.HK) could act as a deterrent to homebuyers and financial institutions.
Shares of the company fell 18% to a record low on Monday after its onshore bonds were suspended.
That was a fresh blow to policymakers trying to bolster confidence in a faltering economy, an effort that was not helped by the weekend’s news that two Chinese listed companies would not make payments on expiring investment products from Zhongrong International Trust Co .
Chinese blue chips (.CSI300) fell 0.73%, adding to a 3.4% drop last week, amid disappointing economic news culminating in a dismal report on new bank lending in July.
US stock futures, however, reacted calmly to the news, rising 0.2% after suffering losses on Friday as surprisingly high readings on US producer prices tested market optimism that inflation was cooling sufficiently to avoid further rate hikes.
CONSUMERS CONTINUE TO CONSUME
On this week’s data list are US Retail Sales numbers, which are expected to show a 0.4% increase in spending this week, with risks high in part due to Amazon’s Prime Day.
Such a result would cast doubt on the market’s benign interest rate outlook, as futures imply a 70 percent chance that the Federal Reserve is done raising rates. The market has also priced in price cuts of more than 120 basis points for next year from around March.
Minutes from the last Fed meeting are due out on Wednesday and may show that Fed members want to keep options open for further rate hikes.
The resilience of the economy coupled with a truly massive need for government borrowing saw 10-year Treasury yields surge at 4.15% after rising 12 basis points last week.
That surge weakened the dollar against the low-yielding yen, rising to 145.22, a high not seen since November last year.
Concerns over possible intervention then led to a drop to 144.92, although markets largely believe the Japanese authorities are not quite ready to step in again to support the currency.
The euro traded in a wider range against the dollar at $1.0954, although the dollar strengthened against its Australian and New Zealand counterparts, which serve as China risk proxies.
The rise in the dollar and yields weighed on gold prices from $1,914 an ounce after falling for three straight weeks.
Oil markets saw some profit-taking on Monday, with Brent falling 0.3% to $86.56 a barrel, while US crude fell 0.37% to $82.9 a barrel.
Reporting by Wayne Cole and Alun John, additional reporting by Ankur Bannerjee in Singapore; Adaptation by Sam Holmes and Bernadette Baum
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