SYDNEY — Asian stocks struggled on Monday ahead of Chinese data likely to boost the case for serious stimulus even as Beijing appears deaf to calls, while rising Treasury yields put pressure on stocks. exorbitant valuations of technology stocks and supported the dollar.
Geopolitics was an added concern after a Russian warship fired warning shots at a cargo ship in the southwestern Black Sea on Sunday, heralding a new stage in the war that could impact oil prices. oil and foodstuffs.
MSCI’s broadest index of Asia-Pacific stocks outside Japan fell another 0.2%, after losing 2% last week. The Japanese Nikkei was down 0.1%, although exporters were supported by yen weakness.
China’s blue chips also fell 3.4% last week amid a string of disappointing economic news, culminating in a dismal new bank lending report in July.
Retail sales and industrial production figures are due on Tuesday and analysts assume they will be disappointing, maintaining downward pressure on the yuan.
Adding to concerns about the deteriorating health of the country’s indebted property developers, two Chinese listed companies had not received payment on maturing investment products from Zhongrong International Trust Co.
China’s Country Garden, the country’s largest private real estate developer, is also expected to suspend trading in its 11 onshore bonds from Monday.
S&P 500 futures fared better in early trading with a 0.2% gain, while Nasdaq futures edged up 0.3%.
That followed Friday’s losses when surprisingly high readings on U.S. producer prices tested market optimism that inflation would cool enough to stave off further rate hikes.
Consumers continue to consume
U.S. retail sales figures this week are expected to show a 0.4% increase in spending, with high risk thanks in part to Amazon’s Prime Day.
BofA analysts say credit and debit card spending data suggests sales could rise 0.7% with activity around the July 4 holiday stronger than last year.
Such a result would challenge the market’s benign outlook for rates, with futures implying a 70% chance the Federal Reserve is done climbing. The market also has over 120 basis points of price cuts for next year starting around March.
Minutes from the Fed’s latest meeting are scheduled for Wednesday and may show members wanted to keep their options open on further upside.
Goldman Sachs analysts say the market has gone too far in pricing aggressive easing.
“The motivation for cutting out of a recession would be to normalize the funds rate from a restrictive level to a neutral level once inflation is closer to target,” they wrote in a note.
“Normalization is not a particularly pressing motivation to cut, and for this reason we also see significant risk that the Fed will remain fairly stable.”
They expect cuts of just 25 basis points per quarter starting in the second quarter of next year, with the funds rate eventually stabilizing at 3-3.25%.
The resilience of the economy combined with a truly massive need for government borrowing kept 10-year Treasury yields at 4.176%, after rising 12 basis points last week.
The rise pushed the dollar against the low-yielding yen to 144.90 and a hair’s breadth from the year’s high at 145.07. The euro has already reached its highest level since the end of 2008 and stood at 158.51 yen.
The single currency was more tied to the dollar range at $1.0942.
The rising dollar and yields weighed on gold at $1,914 an ounce, down for three straight weeks.
Oil prices have moved the other way as tight supply meets expectations of strong demand to deliver seven straight weeks of gains.
Early Monday, profit-taking sent Brent down 45 cents to $86.36 a barrel, while U.S. crude fell 39 cents to $82.80 a barrel.
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