(Bloomberg) — China’s worsening property slump sapped confidence in global markets Monday, as evidence mounted that the world’s economic engine is stalling. Treasury yields edged toward new highs.
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The Stoxx 600 traded little changed with US futures as stocks struggled for direction in thin summer trading. Treasury yields edged up toward levels last seen in November on speculation the Federal Reserve will keep interest rates in restrictive territory and disappoint investors hoping for easier policy. Focus later this week will be on minutes of Fed’s latest policy meeting as traders seek clues on the central bank’s next move.
An Asian equity gauge was set for its lowest close since June as stocks fell across the region. Shares in mainland China declined while almost all of the 80 members of Hong Kong’s Hang Seng Index slipped. The CSI 300 Index, which is the benchmark of onshore Chinese shares, is now close to erasing all of the gains it made after the Politburo meeting last month amid signs of deterioration in the economy.
Country Garden Holdings Co., once China’s largest private-sector developer by sales, is in the spotlight as the company is at risk of joining a slew of defaulters if it fails to make coupon payments on two dollar bonds within a 30-day grace period. Its shares dropped more than 19% in Hong Kong on Monday, after closing below HK$1 for the first time ever last week.
China’s economic recovery is being weighed down by a worsening property slump, with data due Tuesday likely to show little sign of a rebound in growth. Investors are expressing concern that the official response won’t be enough to shore up losses, according to Yan Wang, chief emerging-market and China strategist at Alpine Macro Inc.
“There’s plenty of pessimism,” he said on Bloomberg Television. “Some of the developers obviously are trading at very depressed levels. So the market is not pricing for that.”
Recent data shows China’s bank loans slid to a 14-year low, consumer and producer prices both declined, and exports slid the most since February 2020. Adding to the jitters is news that one of China’s largest largest private wealth managers missed payments on investment products sold to the nation’s high-net worth clients and corporations, stoking fears more defaults may happen in such products.
In currencies, the offshore yuan fell toward its weakest level this year as economic data continued to disappoint and is among Asia’s worst-performing currencies year-to-date.
The yen steadied after breaching its year-high level of 145.07 versus the dollar as investors started to monitor for any signs the government may intervene as it did last year.
The ruble broke through the psychologically important level of 100 to the dollar for the first time since March last year, even after Russia’s central bank sought to arrest the slump by halting its foreign-currency purchases on the domestic market for the rest of 2023.
Read: Ruble Crashes Through 100 Per Dollar Despite Central Bank’s Move
Russia’s currency has almost halved in value from its peak in June last year as President Vladimir Putin’s invasion of Ukraine grinds on with no end in sight and sanctions including an oil price cap slash revenue from exports.
Oil dropped amid a shift away from risk assets spurred by concerns about China. Gold steadied around the lowest level since early July.
Key events this week:
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China medium-term lending, retail sales, industrial production, fixed-asset investment, FX net settlement, Tuesday
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Japan industrial production, GDP, Tuesday
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UK jobless claims, unemployment, Tuesday
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US retail sales, empire manufacturing, business inventories, cross-border investment, Tuesday
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Reserve Bank of Australia policy minutes, Tuesday
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Federal Reserve Bank of Minneapolis President Neel Kashkari speaks, Tuesday
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China property prices, Wednesday
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Eurozone industrial production, GDP, Wednesday
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UK CPI, Wednesday
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US FOMC minutes, housing starts, industrial production, Wednesday
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US initial jobless claims, US Conf. Board leading index, Thursday
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Eurozone CPI, Friday
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Japan CPI, Friday
Some of the main moves in markets:
Stocks
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The Stoxx Europe 600 fell 0.1% as of 8:13 a.m. London time
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S&P 500 futures were little changed
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Nasdaq 100 futures were little changed
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Futures on the Dow Jones Industrial Average fell 0.1%
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The MSCI Asia Pacific Index fell 1.3%
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The MSCI Emerging Markets Index fell 1%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0941
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The Japanese yen was little changed at 144.82 per dollar
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The offshore yuan fell 0.2% to 7.2747 per dollar
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The British pound was little changed at $1.2686
Cryptocurrencies
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Bitcoin fell 0.1% to $29,373.41
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Ether fell 0.3% to $1,846.89
Bonds
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The yield on 10-year Treasuries advanced two basis points to 4.17%
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Germany’s 10-year yield advanced one basis point to 2.64%
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Britain’s 10-year yield advanced one basis point to 4.54%
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Sagarika Jaisinghani and Michael Msika.
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