Traders Feel Pressure from China Worries Following Disappointing Data: Market Recap

(Bloomberg) — Asian stocks traded in a narrow range on Monday as investors weighed a raft of data which reinforced concerns about the health of China’s economy.

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South Korean shares eked out a gain while Australian equities fell and futures pointed to a lower start in Hong Kong. Cash trading of US Treasuries was closed in Asia due to a holiday in Japan. The yen dropped after Bank of Japan Governor Kazuo Ueda indicated Friday that authorities aren’t in a hurry to raise interest rates again.

China’s economy is showing little signs of recovery, with data last week showing governments have cut spending while the youth jobless rate climbed to its highest level this year as the nation’s banks refrain from cutting lending rates. Adding to the weak sentiment, the US is said to be planning rules that would ban Chinese hardware and software for connected vehicles as soon as Monday.

“Things in China are going from bad to worse,” said Tony Sycamore, an analyst at IG in Sydney. “With Japanese stock markets closed for a public holiday, the PBOC disappointing the market on Friday, and US yields ratcheting higher, we are likely to see a more downbeat tone across Asian equity markets today.”

The dollar was little changed against its Group-of-10 peers early Monday. Australian bonds fell ahead of the central bank likely extending a policy pause on Tuesday as housing costs underpin sticky inflation.

Broadly, markets are readying for the final quarter after the Federal Reserve began its long awaited rate cut cycle last week, lifting everything from Indonesian bonds to gold. Data this week including the Fed’s preferred measure of inflation should confirm whether the rally will extend, with a deterioration likely lifting the chances of a further 50 basis point cut.

Brent crude rose, with the focus on an escalation in the conflict between Israel and Hezbollah. Gold steadied near a record.

In Asia, Sri Lankans at the weekend elected a leftist political outsider as president who has vowed to reopen negotiations with the International Monetary Fund over its $3 billion bailout, which came with spending cuts and tax hikes.

Elsewhere this week, factory activity and consumer confidence readings in Europe are due while Australia and Tokyo are set to release inflation data. A swath of Fed speakers are due as economic data including the US personal consumption expenditures gauge and jobless claims are scheduled to be released.

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