Asian stocks were off sessions highs Monday and the dollar rose as investors reacted to surprise interest-rate cuts in China and data highlighting its economic travails, which are dimming the global outlook.

China and Hong Kong shares struggled, leaving an Asian equity index with a gain of less than 0.5%. Japan was the key prop with the Nikkei 225 set to erase its 2022 losses. S&P 500 and Nasdaq 100 futures dipped but Europe’s advanced.

Data showed China’s retail sales, investment and industrial production for July all missed economists’ estimates. The central bank had earlier unexpectedly cut borrowing costs. Chinese bond yields and the offshore yuan fell.

Elsewhere, Treasury yields were little changed and the bond curve remained deeply inverted, pointing to worries that the Federal Reserve will tip the US into an economic contraction in a campaign against high inflation.

Equity markets in recent weeks have drawn succor from signs of slowing price pressures, which stirred hopes of a shift by the Fed to less aggressive monetary tightening.

But China’s faltering economy shows many hurdles still lie ahead for a near-13% rebound in global stocks from June lows. The bounce in world shares has reduced this year’s losses to about 13%.

“This will put a lot of downside risk to the recovery in the second half,” Sian Fenner, lead Asia economist at Oxford Economics, said on Bloomberg Television. She was referring to China’s economic outlook in the wake of the activity data.

Investors are also keeping a wary eye on US-China tension. A US congressional delegation landed in Taiwan on Sunday for a two-day visit. House Speaker Nancy Pelosi’s stopover on the island, which China regards as part of its territory, led Beijing to conduct some of its most provocative military drills.

Elsewhere, oil extended losses, gold retreated below $1,800 an ounce and Bitcoin hovered near $25,000.

Source:
courtesy of BLOOMBERG

by Tassia Sipahutar

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