China property fears hurt shares, dollar climbs
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[August 14, 2023] By
Wayne Cole and Alun John
SYDNEY (Reuters) - Shares slid on Monday as China's property woes
amplified the case for stimulus even as Beijing seemed deaf to the
calls, while rising Treasury yields lifted the dollar, which briefly
poked its head above the closely watched 145 yen level.
There was plenty to be watching on the geopolitical front too, as
Argentine voters punished the two main political forces in a primary
election on Sunday, pushing a rock-singing libertarian outsider
candidate into first place.
A day earlier, a Russian warship fired warning shots at a cargo ship in
the southwestern Black Sea, heralding a new stage of the war that could
impact oil and food prices. The Russian rouble on Monday softened past
the psychologically key 100 per U.S. dollar threshold for the first time
since March, with President Vladimir Putin's economic advisor blaming
loose monetary policy.
MSCI's world index was down 0.2%, with most of the losses driven by
Asian stocks. The main ex-Japan index was down 1.7%, after shedding 2%
last week. Japan's Nikkei was off 1.3%.
Europe's broad STOXX 600 benchmark was flat but the miner-heavy and
China-exposed FTSE lagged, falling 0.2%.
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“A crisis in the Chinese real estate sector is a story the market has
heard before and not one which has typically come with a happy ending
for stocks,” said AJ Bell investment director Russ Mould.
Trouble in China's largest private property developer, Country Garden,
could have a chilling effect on homebuyers and financial institutions.
The company's shares plunged 18% to a record low on Monday after its
onshore bonds were suspended.
That was a fresh blow to policymakers trying to shore up confidence in a
stuttering economy, aspirations that were not helped by weekend news two
Chinese listed companies had not received payment on maturing investment
products from Zhongrong International Trust Co.
Chinese blue chips fell 0.73%, on top of a 3.4% decline last week, amid
disappointing economic news culminating in a dire report on new bank
loans in July.
U.S. share futures shrugged off the news however, rising 0.2%, following
losses on Friday when surprisingly high readings on U.S. producer prices
tested market optimism that inflation would cool enough to avoid further
rate hikes.
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Passersby walk past an electric board
displaying Japan's Nikkei share average outside a brokerage in
Tokyo, Japan April 18, 2023. REUTERS/Issei Kato
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CONSUMERS KEEP CONSUMING
On this week's data docket are figures on U.S. retail sales this
week are forecast to show a 0.4% pick up in spending, with risks on
the high side thanks in part to Amazon's Prime Day.
Such an outcome would challenge the market's benign outlook for
rates, with futures implying a 70% chance the Federal Reserve is
done hiking. The market also has more than 120 basis points of cuts
priced in for next year starting from around March.
Minutes of the Fed's last meeting are due on Wednesday and could
show members wanted to keep their options open on further hikes.
The resilience of the economy combined with a truly massive
government borrowing requirement kept 10-year Treasury yields up at
4.15%, after a rise of 12 basis points last week.
That rise juiced the dollar against the low-yielding yen, hoisting
it as far as 145.22 and a peak not seen since November last year.
Concerns about possible intervention then saw it edge back to
144.92, though the broad sense in markets is Japanese authorities
are not quite ready to step in again to prop up the currency.
The euro was more range-bound on the dollar at $1.0954, though the
dollar climbed on its Australian and New Zealand counterparts, as
proxies for China risk.
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The ascent of the dollar and yields was weighing on gold at $1,914
an ounce, having fallen for three weeks in a row. [GOL/]
Monday saw some profit-taking in oil markets nudging Brent down 0.3%
to $86.56 a barrel, while U.S. crude fell 0.37% to $82.9 per barrel.
(Reporting by Wayne Cole and Alun John, additional reporting by
Ankur Bannerjee in Singapore; Editing by Sam Holmes and Bernadette
Baum)
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