Equities Back Under Pressure Amid China Concerns: Markets Wrap

(Bloomberg) — Stocks fell on Tuesday as a rally in global stocks lost momentum and investors worried about a tepid recovery in post-pandemic China.

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Stocks fell from Hong Kong and Shanghai to Tokyo and Seoul while US benchmark futures also fell after Wall Street closed for a holiday on Monday. Australian shares bucked the trend, posting small gains.

The rise in shares of Alibaba Group Holding Ltd. partially reversed an earlier drop of 1.8% after the sudden replacement of its CEO and chairman.

Broader stock moves indicated more concern about Chinese growth and a lack of fresh stimulus from Beijing. Chinese real estate companies were among the biggest losers on Tuesday after disappointment with the scale of cuts by banks to lending rates, with a 10 basis point cut to the five-year rate falling short of some expectations.

“The market was hoping for a 15 basis point cut to the 5-year LPR for any sign of stronger support for the real estate market,” said Redmond Wong, strategist at Saxo Capital Markets.

The yen weakened to 142 against the dollar as loose monetary policy in Japan weighed on the currency. The yuan weakened slightly, falling for a third day.

The cost of banks borrowing HK dollars from each other for a month rose to the highest level since 2007. The move comes after prolonged intervention in the currency reduced the city’s liquidity pool and soared demand for liquidity.

The Australian dollar fell 0.7% minutes after the latest central bank decision – when interest rates were unexpectedly raised – showed that the case for a move in either direction was well balanced.

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Short-term yields on Australian government bonds changed direction and fell after the release of the central bank’s meeting minutes. US Treasury yields rose after a break from trading on Monday.

Meanwhile, with growing uncertainty about the path of the Fed’s interest rates, US traders oscillate between the temptation to rally and worry that it has been exhausted and that the market has become overbought.

Looking ahead, Federal Reserve Chairman Jerome Powell will present his semi-annual report to Congress on Wednesday. Speakers this week include St. Louis Federal Reserve President James Bullard and his counterparts in New York and Chicago.

Federal Reserve policymakers kept interest rates unchanged at their latest meeting but warned of further tightening ahead. The decision came last week with expectations that borrowing costs would rise by 5.6% in 2023, which means a quarter-point or half-point increase in the interest rate before the end of the year.

Elsewhere in the markets, gold was little changed while oil fell as China’s plans to prop up its economy were deemed insufficient to reinvigorate demand.

Main events this week:

• Residences begin in the US, Tuesday

• Louis Federal Reserve Bank of St. Louis President James Bullard speaks, Tuesday

• New York Federal Reserve Bank President John Williams speaks on Tuesday

• Federal Reserve Chairman Jerome Powell delivers semi-annual congressional testimony before the House Financial Services Committee, Wednesday

• Chicago Federal Reserve President Austin Goolsby speaks Wednesday

• Eurozone Consumer Confidence, Thursday

• Price decisions in the UK, Switzerland, Indonesia, Norway, Mexico, the Philippines and Turkey on Thursday

• The leading indicator of the US Congressional Council, Initial Jobless Claims, Current Account, Existing Home Sales, Thursday

• Federal Reserve Chairman Jerome Powell delivers semi-annual congressional testimony before the Senate Banking Committee, Thursday

• Cleveland Federal Reserve’s Loretta Mester speaks Thursday

• Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday

• Japanese CPI, Friday

• Standard & Poor’s Global Manufacturing Index in the US, Friday

• Louis Federal Reserve Bank of St. Louis President James Bullard speaks on Friday

Some of the major movements in the markets:

Stores

• S&P 500 futures were down 0.3% as of 2:26 p.m. Tokyo time.

• The Nasdaq 100 fell 0.4%.

• Japan’s Topix fell 0.6%.

• Australia’s S&P/ASX 200 rose 0.8%

• Hong Kong’s Hang Seng fell 1.6%.

• The Shanghai Composite Index fell 0.3%.

• The futures contracts on the Euro Stoxx 50 are unchanged

currencies

• The Bloomberg Spot Dollar Index rose 0.1%.

• The euro was little changed at $1.0916

• The Japanese yen was little changed at 142.10 per dollar

• The external yuan fell 0.2 percent to 7.1818 per dollar

• The Australian dollar fell 0.8% to $0.6794

• The British pound fell 0.1 percent to $1.2774

Digital currencies

• Bitcoin rose 0.9% to $26,962.78

• Ether hasn’t changed much at $1,731.79

bonds

• The yield on the 10-year Treasury note advanced four basis points to 3.80%.

• The yield on 10-year Japanese bonds was unchanged at 0.385%.

• The 10-year Australian bond yield advanced five basis points to 4.02%.

goods

• West Texas Intermediate crude fell 1.4 percent to $70.79 a barrel

• Spot gold fell 0.1 percent to $1948.25 an ounce

This story was produced with help from Bloomberg Automation.

— With assistance from Jason Scott, Richard Henderson, and Charlotte Yang.

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