Asia shares mixed, China cuts rates as data disappoints

FILE PHOTO – People pass an electronic screen displaying Japan’s Nikkei stock price index in a conference hall in Tokyo, Japan June 14, 2022. REUTERS/Issei Kato

SYDNEY, Aug. 15 (Reuters) – Asian stocks were mixed Monday after China’s central bank cut key interest rates as a series of economic data fell short of forecasts, highlighting the need for more stimulus to boost the world’s second-largest economy. world to support.

Retail sales and industrial production both rose less than expected in July, contributing to the disappointing reading of new bank lending.

The cut in interest rates helped cushion the blow somewhat, allowing Chinese blue chips (.CSI300) to remain stable, while the yuan and bond yields declined. read more

“These are further signs that post-Shanghai post-lockdown growth is rapidly slowing,” said Alvin Tan, a strategist at RBC. “Monetary policy is losing momentum, except possibly the exchange rate, with exports being the only bright spot in the economy.”

MSCI’s broadest index of Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) was flat, after jumping 0.9% last week.

Japan’s Nikkei (.N225) rose 1.1% as data showed the economy grew at an annualized 2.2% in the second quarter, slightly below estimates. read more

Investors remain concerned to see if Wall Street can sustain its rally, as hopes that US inflation has peaked this week will be tested by likely aggressive commentary from the Federal Reserve.

“Wednesday’s FOMC minutes should reinforce the aggressive tone of recent Fed speakers that they are far from done with rates and inflation,” warned Tapas Strickland, an economics director at NAB.

Markets still give about a 50% chance that the Fed will raise 75 basis points in September and that yields will rise to about 3.50-3.75% by the end of the year.

Hopes for a soft economic landing will also be tested against data on US retail sales, which is expected to show a sharp slowdown in spending in July.

There is also a risk that revenues from major retailers, including Walmart (WMT.N) and Target (TGT.N), will be accompanied by warnings of a decline in demand.

Geopolitical risks remain high with a delegation of US lawmakers in Taiwan for a two-day trip. read more

EUROSTOXX 50 futures added 0.4% and FTSE futures were up 0.5%. S&P 500 futures and Nasdaq futures both fell about 0.2% after last week’s gains.

However, the S&P index is nearly 17% above its mid-June low and just 11% from its all-time high, amid bets that the worst inflation is over, at least in the United States.

PEAK INFLATION

“The leading indicators we observe support moderation with easing supply pressures, dwindling demand, money supply collapsing, falling prices and declining expectations,” BofA analysts said.

“Key components of headline inflation, including food and energy, are also at a turning point. Both Wall Street and Main Street now expect inflation to moderate.”

The bond market still seems doubtful that the Fed can deliver a soft landing, while the yield curve is still deeply inverted. The 2-year yield of 3.26% is 42 basis points higher than that for 10-year bonds.

Those yields have supported the US dollar, although it fell 0.8% against a basket of currencies last week as risk sentiment improved.

The euro held steady at $1.0249, after jumping 0.8% last week, though it shied away from resistance around $1.0368. Against the yen, the dollar stabilized at 133.23, after losing 1% last week.

“We still feel that the dollar rally will resume in the foreseeable future,” said Jonas Goltermann, senior economist at Capital Economics.

“A lot more good news about inflation will be needed before the Fed changes tack. The minutes from the last FOMC meeting and the Jackson Hole conference could further push back the idea that the Fed is ‘rotating’.”

The slump in the dollar caused a sort of reprieve for gold, which held around $1,794 an ounce after gaining 1% last week.

Oil prices fell as China’s disappointing data heightened concerns about global fuel demand.

The head of the world’s largest exporter, Saudi Aramco, said it is poised to ramp up production as production resumes at several offshore platforms in the US Gulf of Mexico after a brief hiatus last week.

Brent fell 99 cents to $97.16, while US crude fell 89 cents to $91.20 a barrel.

Reporting by Wayne Cole; Editing by Sam Holmes and Raju Gopalakrishnan

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