Asian Stocks Expected to Fall as China Worsens: Markets Collapse

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(Bloomberg) — Asian stocks are poised to fall early Monday as concerns over the health of the Chinese economy grow. US equity futures were steady.

Contracts in Australia, Hong Kong and mainland China point to an early loss at the Monday open, while moves in Asia may be exacerbated by thin liquidity with Japanese markets closed for a holiday. The S&P 500 closed 0.2% lower on Friday following a quarterly options expiry. 

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Data late on Friday showed that Chinese governments have cut spending while the youth unemployment rate rose to its highest level this year as the nation’s banks refused to cut lending rates. Adding to the weak sentiment, the US is said to be planning regulations to ban Chinese hardware and software for connected cars as soon as Monday.

“Things in China are getting worse,” said Tony Sycamore, an IG analyst in Sydney. “With Japanese stock markets closed for a public holiday, the PBOC disappointing the market on Friday, and the US yielding rising yields, we are likely to see a more bearish tone across Asian equity markets today.”

Broadly, markets are poised for the final quarter after the Federal Reserve began its long-awaited rate-cutting cycle last week, lifting everything from Indonesian bonds to gold. Data this week including the Fed’s preferred inflation rate should ensure that the rally will extend, with a possible breakdown raising the possibility of a 50 basis point cut.

After swinging between gains and losses in the final minutes of Friday’s trading, the S&P 500 and Nasdaq 100 both closed lower with the broader benchmark fresh off its 39th record high of 2024. The blue-chip Dow Jones Industrial Average closed at a new record high. More than 20 billion shares changed hands on US exchanges, the busiest session since January 2021.

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Intel Corp. was among the session’s gainers after reports of a bid for Qualcomm Inc. Stocks may extend gains in US trading after Apollo Global Management Inc. it will reportedly offer to make an equity-like investment of up to $5 billion in the manufacturer. .

Gold closed above $2,600 an ounce on Friday, making gains after an Israeli strike on the suburbs of Beirut. Precious metals and oil were firm in early trading as Hezbollah launched a series of retaliatory attacks in northern Israel after pager and other electronic device explosions killed at least 39 people in Lebanon.

The dollar was little changed against major peers early Monday. US Treasuries trading is closed in Asia due to the Japanese holiday. Australian bonds fell ahead of the central bank’s possible easing of policy on Tuesday as housing costs strengthened sticky inflation.

“Our Australian economics team expects the RBA’s comments to be hawkish, albeit less hawkish than in August, helping to steer the Australian dollar higher,” Commonwealth Bank of Australia strategists including Joseph Capurso wrote in a note to clients. “It needs to go well for the RBA to lower the rate this year; The risk is delayed until the beginning of 2025. “

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Elsewhere this week, factory employment and consumer confidence readings in Europe are due while Australia and Tokyo are set to release inflation data. A slew of Fed speakers because economic data including a gauge of US personal consumption expenditures and unemployment claims are scheduled to be released.

Important events this week:

• Malaysia CPI, Monday
• Eurozone HCOB Manufacturing PMI, HCOB Services PMI, Monday
• UK S&P Global Manufacturing PMI, S&P Global Services PMI, Monday
• Australia’s rate decision, Tuesday
• Japan Jibun Bank Manufacturing PMI, Services PMI, Tuesday
• Mexico CPI, Tuesday
• Bank of Canada Governor Tiff Macklem speaks, Tuesday
• Australia CPI, Wednesday
• China’s medium-term credit rating, Wednesday
• Swedish standard decision, Wednesday
• Swiss standard decision, Thursday
• ECB President Christine Lagarde speaks, Thursday
• US jobless claims, durable goods, revised GDP, Thursday
• Fed Chairman Jerome Powell delivers pre-recorded remarks at the 10th annual US Treasury Market Conference, Thursday.
• Mexico rate decision, Thursday
• Japan Tokyo CPI, Friday
• China’s industrial profits, Friday
• Eurozone consumer confidence, Friday
• US PCE, University of Michigan consumer sentiment, Friday

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Some of the main steps in the market:

Shares

• S&P 500 futures were little changed as of 8:23 am Tokyo time
• Hang Seng futures down 0.5%
• S&P/ASX 200 futures down 0.8%

Funds

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.1163
• The Japanese yen was little changed at 143.82 per dollar
• The onshore yuan was little changed at 7.0442 per dollar
• The Australian dollar was little changed at $0.6806

Cryptocurrencies

• Bitcoin rose 0.4% to $63,486.59
• Ether rose 0.1% to $2,576.21

Bonds

• Australia’s 10-year yield advanced three basis points to 3.95%

Goods

• West Texas Intermediate crude was little changed
• Local gold had changed little

This story was produced with the help of Bloomberg Automation.

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