Asia stocks mixed, China cuts rates on disappointing data

FILE PHOTO – People walk past an electronic screen showing Japan’s Nikkei stock price index inside a conference room in Tokyo, Japan June 14, 2022. REUTERS/Issei Kato

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  • Nikkei rises, S&P 500 futures fall
  • PBOC cuts key rates, China data misses forecasts
  • Watch the Fed Minutes, US Retail Sales and Earnings

SYDNEY, Aug 15 (Reuters) – Asian stocks were mixed on Monday after China’s central bank cut key interest rates after a series of economic data missed forecasts and underscored the need for more stimulus to support the second largest economy in the world.

Retail sales and industrial production rose less than expected in July, adding to a disappointing reading on new bank loans.

The rate cut helped cushion the blow somewhat and left leading Chinese companies (.CSI300) constant, while the yuan and bond yields fell. read more

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“These are further signs that the post-Shanghai lockdown growth rebound is fading fast,” said Alvin Tan, strategist at RBC. “Monetary policy is losing traction, except possibly for 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) it was flat, having rebounded 0.9% last week.

japan nikkei (.N225) rose 1.1% as data showed the economy grew 2.2% annualized in the second quarter, only slightly below estimates. read more

Investors remain eager to see if Wall Street can sustain its rally as hopes that US inflation has peaked will be tested by hawkish comments from the Federal Reserve this week.

“Wednesday’s FOMC minutes should reinforce the hawkish tones of recent Fed speakers that they are nowhere near done with rates and inflation,” said Tapas Strickland, NAB economics director.

Markets continue to suggest around a 50% chance that the Fed will hike 75 basis points in September and that rates will rise to around 3.50-3.75% by the end of the year.

Hopes of an economic soft landing will also be affected by US retail sales data, which is expected to show a sharp slowdown in spending in July.

There is also earnings risk from major retailers, including Walmart. (WMT.N) and target (TGT.N)it could be mixed with warnings about a drop 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 rose 0.5%. S&P 500 and Nasdaq futures were down about 0.2% after last week’s gains.

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

MAXIMUM INFLATION

“The main indicators we watch provide support for moderation with supply pressures easing, demand weakening, money supply collapsing, prices falling and expectations falling,” the analysts said. from BofA.

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

The bond market still seems doubtful that the Fed can manufacture a soft landing, with the yield curve still deeply inverted. Two-year yields at 3.26% are 42 basis points above those on 10-year notes.

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

The euro was holding at $1.0249, having bounced 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.

“Our feeling remains that the dollar rally will resume before too long,” said Jonas Goltermann, senior economist at Capital Economics.

“It will take a lot more good news on inflation before the Fed changes course. The minutes from the latest FOMC meeting and the Jackson Hole conference could well push back the notion that the Fed is ‘turning around’ even further.” .

The dollar pullback provided something of a respite for gold, which was hovering around $1,794 an ounce, after gaining 1% last week.

Oil prices fell as disappointing data from China added to concerns about global fuel demand.

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

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

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Information from Wayne Cole; Edited by Sam Holmes and Raju Gopalakrishnan

Our standards: The Thomson Reuters Trust Principles.

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