(Bloomberg) — Chinese shares led losses in Asian equities on concern over a weak property sector and uncertain growth outlook. Most other regional benchmarks also fell as investors positioned for this week’s US inflation data and Federal Reserve meeting.
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Benchmarks in mainland China and Hong Kong both headed for their lowest closing levels since April. Shares linked to electric vehicle makers slumped before the European Commission’s decision of provisional duties expected this week, while tourism-related firms dropped amid disappointing travel demand during the recent Dragon Boat Festival holiday.
“The Hang Seng Index remains weak, with market participants wanting to see more evidence of a recovery trend ahead, but incoming data has been more mixed than assuring,” Jun Rong Yeap, a market strategist at IG Asia Pte, wrote in a client note. “Eyes will be on China’s inflation data this week, where positive consumer-price growth may be on watch to reflect some stabilisation in domestic demand.”
Treasuries crept higher in Asia, while Bloomberg’s gauge of the dollar advanced for a fourth day. Australia’s bonds dropped, catching up with Friday’s move in Treasuries as traders pushed out their timeline for Fed interest-rate cuts.
Australian business confidence turned negative in May and conditions slipped to below-average levels, a report showed, suggesting elevated interest rates and the worsening consumer outlook are weighing on the corporate sector.
Fed Decision
Wall Street’s most-prominent trading desks from JPMorgan Chase & Co. to Citigroup Inc. are urging investors to prepare for a potential stock-market jolt after US consumer price data and the Fed rate decision both due Wednesday.
The Fed is widely expected to keep borrowing costs on hold, but there’s less certainty on officials’ rate projections. A 41% plurality of economists expect policymakers to signal two cuts in their “dot plot” while an equal number expect the forecasts to show just one or no cuts at all.
“The interest-rate guessing game goes on,” said Chris Larkin at E*Trade from Morgan Stanley. “Even the friendliest inflation numbers probably won’t push the Fed to act any sooner than September.”
Investors are also gearing up for a Bank of Japan policy decision Friday. The BOJ is expected to discuss cutting bond purchases at the gathering, with some economists predicting the central bank will also lay the groundwork for raising rates next month.
In commodities, oil held its biggest gain since March ahead of an OPEC report that will provide a snapshot on the market outlook. Gold retreated as traders look to this week’s Fed meeting for more clues on when it may pivot to monetary easing. Copper dropped toward the lowest level in more than a month.
Apple Slides
The S&P 500 rose 0.3% Monday to close at a fresh record high. Nvidia Corp. began trading after a 10-for-one stock split.
Apple Inc. sank even after unveiling new artificial-intelligence features. The company’s suppliers also dropped after Apple’s latest artificial ingelligence platform was seen to be disappointing. Billionaire Elon Musk said he would ban Apple devices from his companies if OpenAI’s artificial intelligence software is integrated at the operating system level, calling the tie-up a security risk.
More than 60% of respondents in the latest MLIV Pulse survey expect US stocks to outperform Treasuries on a volatility-adjusted basis next month. That reading has been higher only three times in the history of the survey going back to August 2022.
In corporate news, developer Dexin China Holdings gets liquidation order from a Hong Kong court adding to a growing number of legal victories for creditors involving overdue debt.
Corporate Highlights:
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Activist Elliott Investment Management called for sweeping changes to Southwest Airlines Co.’s leadership to reverse what it sees as years of underperformance by one of the biggest US carriers.
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Advanced Micro Devices Inc. was cut at Morgan Stanley, which said investor expectations for the chipmaker’s AI business “seem too high.”
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KKR & Co., CrowdStrike Holdings Inc. and GoDaddy Inc. will join the S&P 500 as part of its latest quarterly weighting change.
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Noble Corp., the world’s biggest offshore oil-rig contractor by market value, agreed to buy its smaller rival Diamond Offshore Drilling Inc. in a deal valued at $1.6 billion.
Key events this week:
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China PPI, CPI, Wednesday
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Germany CPI, Wednesday
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US CPI, Fed rate decision, Wednesday
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G-7 leaders summit, June 13-15
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Eurozone industrial production, Thursday
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US PPI, initial jobless claims, Thursday
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Tesla annual meeting, Thursday
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New York Fed President John Williams moderates a discussion with Treasury Secretary Janet Yellen, Thursday
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Bank of Japan’s monetary policy decision, Friday
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Chicago Fed President Austan Goolsbee speaks, Friday
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US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures fell 0.1% as of 1:51 p.m. Tokyo time
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Nasdaq 100 futures fell 0.1%
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Japan’s Topix was little changed
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Australia’s S&P/ASX 200 fell 1.3%
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Hong Kong’s Hang Seng fell 1.7%
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The Shanghai Composite fell 1.1%
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Euro Stoxx 50 futures rose 0.2%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0769
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The Japanese yen fell 0.1% to 157.27 per dollar
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The offshore yuan was little changed at 7.2660 per dollar
Cryptocurrencies
Bonds
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The yield on 10-year Treasuries declined two basis points to 4.45%
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Japan’s 10-year yield was unchanged at 1.020%
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Australia’s 10-year yield advanced nine basis points to 4.31%
Commodities
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West Texas Intermediate crude was little changed
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Spot gold fell 0.3% to $2,302.95 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Jeanny Yu.
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