Asian stocks fall as Chinese economy falters: markets rally

(Bloomberg) — Asian shares fell slightly after four months of gains as China’s efforts to support its ailing economy showed no signs of success.

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A gauge of the region’s stocks fell, marking the first day of trading in a generally volatile month for markets. In Hong Kong, the benchmark index fell almost 2%, while shares of New World Development Co. fell as much as 14% after the debt-laden real estate developer said it expected to post its first annual loss in two decades.

U.S. index futures also fell, suggesting the S&P 500 is due for a reversal after closing higher on Friday as data supported expectations of upcoming Federal Reserve interest rate cuts. The dollar was steady, while cash government bonds were closed globally on Monday for the US Labor Day holiday. Yields on Australian government bonds rose.

Global funds are positioning themselves for major central banks, including the Federal Reserve, to cut rates in September, while at the same time multiple rounds of stimulus have failed to revive growth in China, where a prolonged real estate market slump has hit domestic demand in the second half of the world. largest economy. Although Caixin China manufacturing data showed an unexpected rise on Monday, the move failed to reverse sentiment after an official gauge of Chinese factory activity shrank for a fourth straight month in August.

“I would be more concerned about the China side of the equation, to be honest,” Carlos Casanova, a senior Asia economist at Union Bancaire Privee, told Bloomberg TV. While the fourth quarter is likely to be positive for Chinese risk assets thanks to efforts to stimulate domestic demand, “there is not enough policy space to take big bazooka support measures like in 2009,” he added.

The latest home sales figures showed a deterioration in the housing market after China Vanke Co. – one of the country’s largest developers – underlined the sector’s woes late on Friday by reporting a six-month loss for the first time in more than two decades.

Authorities also said Friday they had entered the government bond market to curb a brutal bond rally, although the move raises new questions about efforts to stimulate the world’s second-largest economy.

“I think there is a huge problem – everyone recognizes that now,” Hao Ong, chief economist at Grow Investment Group, told Bloomberg’s David Ingles and Yvonne Man in an interview. “The government must do substantially more.”

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Elsewhere in Asia, Japanese companies boosted investment in the second quarter of the year, confirming renewed signs of subdued domestic demand-led activity after growth recovered in the period. Purchasing manager surveys for Taiwan, Thailand and Indonesia all fell, weighing on their currencies.

September Volatility

September is historically a volatile month for global markets. It was one of the worst months for stocks in four years, while the dollar has generally outperformed, according to Bloomberg data. Wall Street’s fear gauge — the Cboe Volatility Index, or VIX — has risen every September for the past three years, the data show.

This month may be no different, as the crucial US jobs report later this week serves as a guide to how quickly or slowly the Fed will cut rates, and as the US election campaign gets into full swing. Options traders spent more than $9 million this month to protect against a rise in the VIX.

Meanwhile, Friday’s data also showed the Fed’s preferred measure of underlying U.S. inflation – the main price index for personal consumer spending – rising at a mild pace. Traders estimate the Fed’s easing cycle will begin this month, with about a one-in-four chance of a 50 basis point cut, according to data compiled by Bloomberg.

“Tactically, good news should be good news for risky assets” and a better-than-expected jobs report is likely to lift stock prices and the dollar, said Chris Weston, head of research at Pepperstone Group in Melbourne. “A 25 basis point cut is the move the Fed really wants to make, so further evidence that the US economy is headed for a soft landing amid non-urgent rate cuts plays into a nirvana backdrop for risk.”

In commodity markets, oil prices fell on signals that OPEC+ will move forward with a plan to boost production from October, amid increasing economic headwinds in China. Gold also fell.

Main events this week:

• India HSBC Manufacturing PMI, Monday

• Eurozone HCOB manufacturing PMI, Monday

• UK S&P Global Manufacturing PMI, Monday

• US markets are closed on Monday for Labor Day

• South Korean CPI, Tuesday

• Switzerland GDP, CPI, Tuesday

• South Africa’s GDP, Tuesday

• U.S. Construction Spending, ISM Manufacturing Index, Tuesday

• Unemployment Mexico, Tuesday

• Brazil’s GDP, Tuesday

• Chile tariff decision, Tuesday

• Australia’s GDP, Wednesday

• China Caixin serves PMI, Wednesday

• Bloomberg CEO Forum in Jakarta, Wednesday

• Eurozone HCOB delivers PMI, PPI on Wednesday

• Tariff decision Poland, Wednesday

• Fed’s Beige Book, Wednesday

• Tariff decision Canada, Wednesday

• South Korea’s GDP, Thursday

• Tariff decision Malaysia, Thursday

• Philippines CPI, Thursday

• Taiwan CPI, Thursday

• Thailand CPI, Thursday

• Eurozone retail sales, Thursday

• Factory orders Germany, Thursday

• First U.S. unemployment claims, ADP employment, ISM services index, Thursday

• Eurozone GDP, Friday

• U.S. Nonfarm Payrolls, Friday

• Unemployment Canada, Friday

• Chile CPI, Friday

• CPI Colombia, Friday

Some of the major moves in the markets:

Stocks

• S&P 500 futures fell 0.2% as of 12:45 p.m. Tokyo time

• Nikkei 225 futures (OSE) fell 0.5%

• Japan’s Topix fell 0.4%

• Australia’s S&P/ASX 200 fell 0.2%

• Hong Kong’s Hang Seng fell 1.8%

• The Shanghai Composite fell 0.6%

• Euro Stoxx 50 futures were little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.1054

• The Japanese yen rose 0.2% to 145.87 per dollar

• The offshore yuan fell 0.1% to 7.1001 per dollar

• The Australian dollar was little changed at $0.6766

Cryptocurrencies

• Bitcoin fell 1.5% to $57,519.23

• Ether fell 2.3% to $2,443.07

Bonds

Raw materials

• West Texas Intermediate crude fell 0.8% to $72.93 a barrel

• Gold fell 0.3% to $2,495.16 an ounce

This story was produced with the help of Bloomberg Automation.

–With help from Winnie Hsu and Joanna Ossinger.

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