Asian Shares Struggle Ahead of China Data, Dollar Climbs
Asian stock markets faced difficulties on Monday, with the Nikkei down 0.5% and S&P 500 futures dipping 0.1%. This comes as property concerns lead to a decline in China shares just before the release of important economic data. Additionally, rising bond yields have boosted the dollar, causing it to reach 145.22 yen, a peak not seen since November of last year.
Investors are anxiously awaiting China’s upcoming retail sales and industrial output figures, which are expected to be disappointing. This anticipation has put downward pressure on the yuan. The poor performance of Chinese blue chips, along with disappointing bank loan reports, have added to concerns about the country’s debt-laden property developers. Notably, two Chinese listed companies have not received payment on maturing investments from Zhongrong International Trust Co.
Geopolitical tensions are also contributing to the uncertain market conditions. On Sunday, a Russian warship fired warning shots at a cargo ship in the Black Sea, signaling a new stage of the war that could have implications for oil and food prices.
Consumer spending in the US remains a bright spot, with forecasted pick-ups in retail sales. However, analysts at BofA caution that the market’s optimistic stance on interest rates may be challenged if the data exceeds expectations. The Federal Reserve could decide to continue hiking rates if spending continues to rise.
While the market has priced in aggressive easing measures, analysts at Goldman Sachs believe that the market may have overcorrected. They expect the Fed to implement 25 basis point cuts starting from the second quarter of next year, with the funds rate eventually stabilizing at 3-3.25%.
In response to rising bond yields and the strengthening dollar, gold prices have fallen for three consecutive weeks. Oil prices, on the other hand, have been on an upward trajectory due to tight supply and strong demand projections.
Overall, market sentiment remains cautious as investors await key data releases and monitor geopolitical developments.
[Reporting by Wayne Cole; Editing by Shri Navaratnam and Sam Holmes]