(Bloomberg) — Chinese stocks led losses on Asian stocks on concerns about a weak real estate sector and uncertain growth prospects. Most other regional benchmarks also fell as investors positioned for US inflation data and this week’s Federal Reserve meeting.
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Benchmarks in mainland China and Hong Kong both fell to their lowest closes since April. Stocks linked to electric vehicle makers fell ahead of the European Commission’s decision on provisional duties expected this week, while tourism-related companies fell due to disappointing travel demand during the recent Dragon Boat Festival holiday.
“The Hang Seng Index remains weak, with market participants looking to see more evidence of a coming recovery trend, but incoming data is mixed rather than reassuring,” Jun Rong Yeap, market strategist at IG Asia Pte, wrote in a client note. . “This week, eyes will be on Chinese inflation data, where positive consumer price growth may reflect some stabilization in domestic demand.”
U.S. Treasury bonds rose higher in Asia, while Bloomberg’s dollar level rose for a fourth day. Australian bonds fell, catching up with Friday’s move in government bonds as traders pushed back their timeline for Fed rate cuts.
Australian business confidence turned negative in May and conditions fell to below average levels, a report showed. This suggests that higher interest rates and a deteriorating consumer outlook are weighing on business.
Fed decision
Wall Street’s most prominent trading desks, from JPMorgan Chase & Co. to Citigroup Inc., are urging investors to prepare for a possible stock market shock after U.S. consumer price data and the Fed’s interest rate decision, both expected Wednesday.
The Fed is widely expected to keep borrowing costs low, but there is less certainty about officials’ interest rate projections. A majority of 41% of economists expect policymakers to signal two cuts in their dot plot, while an equal number expect forecasts to show only one or no cuts at all.
“The interest rate guessing game continues,” said Chris Larkin of Morgan Stanley’s E*Trade. “Even the friendliest inflation numbers are unlikely to prompt the Fed to act until September.”
Investors are also bracing for a policy decision from the Bank of Japan on Friday. The BOJ is expected to discuss cutting bond purchases at the meeting, with some economists predicting the central bank will also lay the groundwork for a rate hike next month.
In the commodities sector, oil posted its biggest gain since March, ahead of an OPEC report that will provide a snapshot of the market’s outlook. Gold retreated as traders look to this week’s Fed meeting for more clues about when this could lead to monetary easing. Copper fell to its lowest level in more than a month.
Apple slides
The S&P 500 rose 0.3% on Monday to close at a new record. Nvidia Corp. began trading after a 10-to-one stock split.
Apple Inc. sank even after the unveiling of new artificial intelligence features. The company’s supplier base also fell after Apple’s latest artificial intelligence platform proved disappointing. Billionaire Elon Musk said he would ban Apple devices from his companies if OpenAI’s artificial intelligence software were integrated at the operating system level. He called the link a security risk.
More than 60% of respondents in the latest MLIV Pulse survey expect U.S. stocks to outperform Treasuries next month on a volatility-adjusted basis. That value has been higher only three times in the survey’s history dating back to August 2022.
In company news, developer Dexin China Holdings is receiving a liquidation order from a Hong Kong court, adding to a growing number of legal victories for creditors over overdue debts.
Business highlights:
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Activist Elliott Investment Management called for sweeping changes in Southwest Airlines Co.’s leadership. to end what it sees as years of underperformance from one of the largest US airlines.
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Advanced Micro Devices Inc. was dropped 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 the latest quarterly weighting change.
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Noble Corp., the world’s largest contractor of offshore oil platforms by market value, agreed to buy its smaller rival Diamond Offshore Drilling Inc. to buy in a deal worth $1.6 billion.
Main events this week:
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Chinese 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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Industrial production in the eurozone, Thursday
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US PPI, first unemployment claims, Thursday
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Tesla annual meeting, Thursday
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New York Fed President John Williams moderates a conversation with Treasury Secretary Janet Yellen on Thursday
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The Bank of Japan’s monetary policy decision, Friday
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Chicago Fed President Austan Goolsbee will speak on Friday
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Consumer Confidence at the American University of Michigan, Friday
Some of the major moves in the markets:
Shares
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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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The Japanese 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 ten-year government bonds fell by two basis points to 4.45%
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The Japanese ten-year yield remained unchanged at 1.020%
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The Australian ten-year yield rose by nine basis points to 4.31%
Raw materials
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West Texas Intermediate crude was little changed
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Gold fell 0.3% to $2,302.95 an ounce
This story was produced with the help of Bloomberg Automation.
–With help from Jeanny Yu.
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