Asian stocks fall as China economy stumbles: Markets Wrap – Business News (Trending Perfect)

(Bloomberg) — Asian stocks retreated after four months of gains as China’s efforts to shore up its struggling economy showed no signs of working.

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Stocks in the region fell, marking the first trading day of a generally volatile month for markets. In Hong Kong, the benchmark index fell about 2%, with shares in New World Development plunging 14% after the debt-laden property developer said it expected to post its first annual loss in two decades.

U.S. index futures also fell, suggesting the S&P 500 was headed for a pullback after closing higher on Friday as data supported expectations of a Federal Reserve rate cut. The dollar was steady as U.S. Treasuries were closed globally on Monday for the U.S. Labor Day holiday. Australian government bond yields rose.

Global investment funds are bracing for interest rate cuts by major central banks including the Federal Reserve in September, while multiple rounds of stimulus have failed to revive growth in China, where a prolonged property slump is dampening domestic demand in the world’s second-largest economy. While Chinese manufacturing data unexpectedly rose on Monday, the move failed to reverse sentiment after an official gauge of Chinese factory activity contracted for a fourth straight month in August.

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

The latest home sales figures showed a deepening deterioration in the housing market, after China Vanke Co. — one of the country’s largest property developers — underscored the industry’s woes late Friday by reporting a half-year loss for the first time in more than two decades.

Authorities also said Friday they had intervened in the government debt market to curb persistently rising bond prices, though the move raises fresh questions about efforts to stimulate the world's second-largest economy.

“I think there is a huge problem — and now everyone is aware of it,” Hao Ong, chief economist at Grow Investment Group, told Bloomberg’s David Engels and Yvonne Mann in an interview. “The government needs to do more.”

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Elsewhere in Asia, Japanese companies boosted investment in the second quarter, underscoring signs of moderate activity led by domestic demand after a recovery in growth during the period. Purchasing managers’ surveys in Taiwan, Thailand and Indonesia all fell, weighing on their currencies.

September fluctuations

September has historically been a volatile month for global markets. It was one of the worst months for stocks in the past four years, while the dollar typically outperforms, according to data compiled by Bloomberg. The data show that Wall Street’s fear gauge — the Chicago Board Options Exchange Volatility Index, or VIX — has risen every September for the past three years.

This month may be no different, with the crucial US jobs report later this week serving as a guide to how quickly or slowly the Federal Reserve will cut interest rates, and with the US election campaign in full swing. Options traders have spent more than $9 million to hedge against the volatility index’s rise this month.

Meanwhile, data released Friday also showed that the Federal Reserve’s preferred measure of core U.S. inflation — the core personal consumption expenditures price index — rose at a moderate pace. Traders are expecting the Fed’s rate-easing cycle to begin this month, with about a one-in-four chance of a 50 basis-point rate cut, according to data compiled by Bloomberg.

“Tactically, good news should be good news for risk assets,” said Chris Weston, head of research at Pepperstone Group in Melbourne, with a better-than-expected jobs report likely to lift stocks and the dollar. “A 25bp rate cut is the move the Fed really wants to make, so more evidence that the US economy is heading for a soft landing, amidst non-urgent rate cuts, plays into the risk-off mood,” he added.

In commodity markets, oil prices fell on signs that OPEC+ will push ahead with a plan to raise output from October, while headwinds to China’s economy mounted. Gold also fell.

Main events this week:

• HSBC India Manufacturing PMI, Monday

• Eurozone HCOB Manufacturing PMI, Monday

• S&P Global Manufacturing PMI UK, Monday

• US markets are closed for Labor Day holiday on Monday.

• South Korea's consumer price index, Tuesday

• Switzerland GDP and CPI, Tuesday

• South Africa GDP, Tuesday

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

• Unemployment in Mexico Tuesday

• Brazil GDP, Tuesday

• Chile interest rate decision, Tuesday

• Australian GDP, Wednesday

• China Services PMI, Wednesday

• Bloomberg CEO Forum in Jakarta, Wednesday

• HCOB Euro Area PMI and PPI services, Wednesday

• Poland Interest Rate Decision, Wednesday

• Fed Beige Book, Wednesday

• Canada Interest Rate Decision, Wednesday

• South Korea's GDP, Thursday

• Malaysia Interest Rate Decision, Thursday

• Consumer Price Index in the Philippines, Thursday

• Taiwan Consumer Price Index, Thursday

• Thailand Consumer Price Index, Thursday

• Eurozone Retail Sales, Thursday

• German factory orders, Thursday

• US Initial Jobless Claims, ADP Employment, ISM Services Index, Thursday

• Eurozone GDP, Friday

• US Non-Farm Payrolls, Friday

• Unemployment in Canada Friday

• Chile Consumer Price Index, Friday

• Colombia Consumer Price Index, Friday

Some key movements in the markets:

Stocks

• S&P 500 futures were down 0.2% as of 12:45 p.m. in Tokyo.

• Nikkei 225 (OSE) futures fell 0.5%.

• Japan's Topix index fell 0.4%.

• Australia's S&P/ASX 200 index fell 0.2%.

• Hong Kong's Hang Seng Index fell 1.8%.

• The Shanghai Composite Index fell 0.6%.

• Euro Stoxx 50 futures were little changed.

Currencies

• The Bloomberg Dollar Index was little changed.

• The euro was little changed at $1.1054.

• The Japanese yen rose 0.2% to 145.87 yen per dollar.

• The offshore yuan fell 0.1% to 7.1001 against the dollar.

• The Australian dollar was little changed at $0.6766.

Cryptocurrencies

• Bitcoin fell 1.5% to $57,519.23

• Ether price fell 2.3% to $2,443.07

Bonds

Goods

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

• Spot gold fell 0.3 percent to $2,495.16 an ounce.

This story was produced with the help of Bloomberg Automation.

–With assistance from Winnie Hsu and Joanna Osinger.

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