(Bloomberg) — Stocks declined after another round of weak data fueled concerns about recovery in China. The prospect of continued monetary tightening by the Federal Reserve also weighed on sentiment.
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A global gauge of stocks headed for a loss after a five-day winning streak. Shares in mainland China were the worst performers in Asia as investors parsed data that showed growth for the second quarter missed estimates. Gross domestic product expanded 6.3% in the second quarter from a year prior, weaker than the median forecast of 7.1% from economists surveyed by Bloomberg.
The onshore and offshore yuan weakened. The People’s Bank of China earlier extended support for the currency, but kept its medium-term lending facility unchanged Monday despite mounting market calls for more stimulus.
“China’s equity market has been underperforming its global peers this year, which suggests the weak growth prospects and lack of policy stimulus have already been fully priced in,” Marcella Chow, global market strategist at JPMorgan Asset Management, said in a note. At the same time, the weak economic readings signal the urgency in escalating policy support to stabilize expectations, she said.
Shares fell in South Korea and were steady in Australia. Japanese markets were shut for a holiday while trading in Hong Kong is canceled due to a storm.
Contracts for European equities slipped and those for the S&P 500 and Nasdaq 100 were lower Monday. The rally in US stocks hit a wall Friday after a report showed consumer sentiment climbed to an almost two-year high, reinforcing the view that the Fed still has a long way to go to bring inflation down.
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The dollar was little changed Monday after a gauge of greenback strength snapped a five-day losing streak Friday. The currency’s weekly slide has the index back near levels last seen in April 2022 as some strategists and investors suggest its long bull run is over.
The yen edged higher after Bank of Japan Governor Kazuo Ueda said uncertainty remains high over the US and global economies. He also said there wasn’t much change in Japan’s bond-market functionality from the previous monetary policy meeting in June.
Yields on Australian government bonds steadied. The Aussie, which is sensitive to China’s economic outlook, weakened.
There’s no trading of cash Treasuries in Asia Monday due to the holiday in Japan. Yields on the two-year Treasury rose by 14 basis points Friday following the consumer sentiment report. That was a contrast to the slide in yields over the preceding few days.
Cautious Tone
Fed Governor Christopher Waller said last week he expected two more rate increases this year to bring inflation down to the 2% goal, though more good data on prices could obviate the need for the second hike.
Swaps pricing show expectations the Fed is virtually certain to raise its benchmark rate by another 25 basis points when it meets this month, with a roughly one-third chance it will make one more such move before stopping its cycle.
The Fed still has to parse through various data to determine its monetary policy path in the current inflation fight, according to Richard Clarida, global economic advisor at Pacific Investment Management Co.
“This committee will certainly be wary of declaring mission accomplished and victory,” he said on Bloomberg Television. “I don’t expect a particularly hard lean to indicating a hike in September, but they’ll want the options open for sure.”
Elsewhere, oil extended declines as China’s growth disappointed and a major Libyan field resumed output. Gold was little changed.
Key events this week:
G-20 finance ministers and central bankers are meeting in India, Monday
European Central Bank President Christine Lagarde speaks, Monday
US empire manufacturing, Monday
US retail sales, industrial production, business inventories, cross-border investment, Tuesday
Eurozone, UK CPI, Wednesday
US housing starts, Wednesday
China loan prime rates, Thursday
US initial jobless claims, existing home sales, Conf. Board leading index, Thursday
Japan CPI, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 6:28 a.m. London time. The S&P 500 fell 0.1% Friday
Nasdaq 100 futures were little changed. The Nasdaq 100 was little changed
Euro Stoxx 50 futures fell 0.5%
South Korea’s Kospi Index fell 0.5%
China’s Shanghai Composite Index fell 1.2%
Australia’s S&P/ASX 200 Index was little changed
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.1226
The Japanese yen rose 0.2% to 138.56 per dollar
The offshore yuan fell 0.3% to 7.1768 per dollar
The Australian dollar fell 0.3% to $0.6815
The British pound was little changed at $1.3090
Cryptocurrencies
Bitcoin was little changed at $30,309.03
Ether rose 0.2% to $1,933.5
Bonds
Commodities
This story was produced with the assistance of Bloomberg Automation.
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