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Asian equities started the week slowly. Trading on Monday was mixed as China reported wholesale prices fell in June and there were further signs the economy is slowing.
Benchmarks rose in Hong Kong, Shanghai and Mumbai, but fell in Tokyo and Sydney. US futures and oil prices fell.
The 5.4% fall in producer prices in June, versus a 4.6% fall in May, points to further weakening demand across many sectors as activity in the world’s second largest economy slows and growth in the United States slows US and Europe under the tide of interest rates eases Rate hikes should curb inflation.
China’s economy has slowed faster than hoped after an initial spurt to growth as the country recovers from the disruptions caused by the COVID-19 pandemic.
Markets in China tend to react positively to signs of weakness in anticipation of possible stimulus measures that could potentially make more money available to invest in equities.
Hong Kong’s Hang Seng rose 0.8% to 18,510.77 and the Shanghai Composite Index rose 0.2% to 3,202.06.
Tokyo’s Nikkei 225 fell 0.8% to 32,126.15, while Seoul’s Kospi slipped 0.1% to 2,525.85. Australia’s S&P/ASX 200 fell 0.3% to 7,018.30.
India’s Sensex rose 0.2%, while Bangkok’s SET fell 0.1%.
As expected, US Treasury Secretary Janet Yellen ended a visit to Beijing aimed at fixing the fence with no major deals or breakthroughs in strained relations. But Yellen said ties were on a “more secure footing” and the two sides would continue to talk despite disputes over many issues, including access to advanced technology, Chinese territorial ambitions and allegations of human rights abuses.
On Friday, Wall Street trended for a mixed result after data suggested the US jobs market is still warm enough to sustain economic growth but may not be so hot that it would push inflation significantly higher. US employers added 209,000 new jobs last month, a slowdown from May’s hiring of 306,000.
Wage growth has held steady over the past month, rather than decelerating as economists had expected, for example. While workers would rather have the reported 4.4% year-over-year increase in average hourly wages than the 4.2% forecast, Wall Street fears that the Fed will see too much wage growth as further upward pressure on inflation.
“Job growth is slowing. “No wonder, given the massive layoffs across the country,” ACY Securities’ Clifford Bennett said in a comment. “In short, while job growth is slowing, it’s not enough to keep the Fed broadly happy.”
The S&P 500 was down 0.3% to 4,398.95, although slightly more stocks in the index rose than fell. The Dow Jones Industrial Average was down 0.6% to 33,734.88 and the Nasdaq Composite was slightly down 0.1% to 13,660.72.
The Russell 2000 index of smaller stocks rose 1.2%.
Much depends on whether the economy can walk the narrow path to avoid a long-prognosticated recession. Despite the significantly higher interest rates the Federal Reserve has introduced to curb inflation, it needs to keep growing.
Recently, the Fed hinted that it may make two more hikes this year before keeping interest rates high to ensure inflation returns to its 2% target. The consensus on Wall Street is that the Fed will hike rates at its next meeting in three weeks.
Government bond yields were mixed after much-anticipated jobs data. The 10-year Treasury yield rose to 4.07% from 4.05% late Friday. It helps set interest rates on mortgages and other major loans.
In other trading Monday, the US benchmark crude price fell 52 cents to $73.34 a barrel in electronic trading on the New York Mercantile Exchange. On Friday, the price rose $2.06 to $73.86 a barrel.
Brent crude, the price basis for international trade, fell 50 cents to $77.99 a barrel.
The US dollar rose to 142.82 Japanese yen from 142.17 yen. The euro slipped from $1.0967 to $1.0958.
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