Asian markets were mixed on Monday and oil fell as investors assessed data showing further weakness in the Chinese economy and comments from Federal Reserve officials that showed they were linked to its campaign of interest rate hikes to fight inflation.
Strong gains from Wall Street titans Amazon and Apple helped US markets end last week with healthy gains and eased concerns about the impact of rising inflation and rising borrowing costs on consumers.
This comes after investors took Fed Chair Jerome Powell’s comments after Wednesday’s monetary policy meeting as an indication that the bank could start to slow the pace of monetary tightening, giving stocks a much-needed boost.
However, analysts warned that inflation would take time to fall from its four-decade highs and that more rate hikes were undoubtedly on the horizon.
And officials confirmed that over the weekend when Minneapolis Fed Chair Neel Kashkari told the New York Times he was “surprised by the markets’ interpretation” of the recent Fed meeting statement.
“The committee is unanimous in our determination to bring inflation back to 2% and I think we will continue to do what we have to do until we are satisfied that inflation is on a good path back to 2% – – and we are still a long way from that.”
This came as Atlanta Fed President Raphael Bostic said he didn’t think the economy was in recession due to continued job growth, but that inflation remained too high and he was “convinced” more was being done must.
Still, Treasuries continued to fall, with the 10-year yield at 2.67 percent, well below the June peak of nearly 3.50 percent, suggesting that expectations for future interest rates are fading.
Figures showing a second consecutive economic slowdown in April-June plunged the United States into a technical recession, though not officially considered one until identified as such by the National Bureau of Economic Research.
Early in Asian trading, investors struggled to extend Wall Street’s lead, with Hong Kong and Shanghai suffering the most from yet another disappointing Chinese economy read.
The closely watched Purchasing Managers’ Index of manufacturing activity contracted in July on weak demand and strict zero-Covid measures imposed in parts of the country.
While Covid curbs have eased in major cities like Shanghai and Beijing, sporadic lockdowns in various cities and communities have worried businesses and consumers.
And there are few signs of policy easing as officials appear to be emphasizing zero-Covid over growth at a Politburo meeting last week.
Also contributing to Hong Kong’s weakness was news that US regulators had added market heavyweight Alibaba to a list of companies at risk of delisting from the New York Stock Exchange if they fail to comply with disclosure rules.
There were also casualties in Taipei and Manila.
However, Tokyo, Sydney, Seoul, Singapore, Jakarta and Wellington all gained.
Data out of China reignited demand concerns in oil markets, sending both main contracts on Monday after last week’s rally.
Brent and WTI both fell more than a percent and investors are now eyeing a meeting of OPEC and other big producers this week where they will discuss their deal to slowly ramp up production.
Joe Biden, during his visit last month, urged Saudi Arabia to open the taps wider as it tried to tackle a key inflation driver around the world.
But the kingdom seems to have taken no such steps so far, as the commodity has lost almost all gains made since the Russian invasion of Ukraine.
“The US has expressed optimism about the potential for a supply response from OPEC+,” said Stephen Innes of SPI Asset Management.
“However, it seems highly unlikely that there will be much appetite for a significant increase in production as Brent is still down (around) 15 percent from year to date highs and (down) 12 percent over the last month,” he added.
“OPEC+ appears to be signaling more of a willingness to work together over the long term, but it would be a surprise if the forthcoming meeting resulted in a significant shift in course.”
– Key figures at 0230 GMT –
Tokyo – Nikkei 225: up 0.5 percent at 27,933.27 (breakthrough)
Hong Kong – Hang Seng Index: down 1.0 percent at 19,948.11
Shanghai — Composite: down 0.3 percent at 3,243.32
Euro/dollar: rise to $1.0238 from $1.0228 on Friday
Pound/dollar: rise to $1.2191 from $1.2189
Euro/Pound: UP at 83.98p from 83.89p
Dollar/Yen: DOWN at 132.47 yen from 133.25 yen
West Texas Intermediate: FALSE, up 1.3 percent at $97.34 a barrel
North Sea Brent Crude: FALSE, up 1.1 percent at $102.85 a barrel
New York – Dow: up 1.0 percent at 32,845.13 (close)
London – FTSE 100: up 1.1 percent at 7,423.43 (close)
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