Asia suffers from the gloom of China. The dollar reached the peak of the yen in 2023

SYDNEY (Reuters) – Asian stocks suffered on Monday ahead of China data that is likely to amplify arguments for serious stimulus even as Beijing appears deaf to demands, while surging Treasury yields lifted the dollar to a 2023 peak in the embattled region. yen.

Geopolitics was an additional concern after a Russian warship on Sunday fired warning shots at a freighter in the southwestern Black Sea, heralding a new phase in the war that could affect oil and food prices.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell another 1.1%, after losing 2% last week. Japan’s Nikkei (.N225) fell 0.5%, even as exporters got a boost from a weaker yen.

China blue chips (.CSi300) lost 1.1%, on top of a 3.4% drop last week, amid a slew of disappointing economic news culminating in a spooky report on new bank loans in July.

Figures on retail sales and industrial production are due out on Tuesday and analysts assume they will be affected, keeping downward pressure on the yuan.

Adding to concerns about the deteriorating health of the country’s indebted real estate developers, news emerged that two Chinese listed companies had not received payment for investment products owed by Zhongrong International Trust Co.

China Country Garden (2007.HK), the country’s largest private real estate developer, is also set to suspend trading of its 11 in-house bonds from Monday.

The bad mood saw S&P 500 futures and Nasdaq futures give up early gains, each by 0.1%.

This followed losses on Friday when a surprisingly high reading of producer prices in the US tested market optimism that inflation would subside enough to avoid further interest rate hikes.

Consumers remain consumers

Figures for US retail sales this week are expected to show a 0.4% rise in spending, with risks on the higher side thanks in part to Amazon’s Prime Day.

Analysts at Bank of America say data on credit and debit card spending suggests sales could rise 0.7%, with activity around the Fourth of July holiday stronger than a year ago.

Such an outcome would challenge the market’s benign expectations regarding rates, with futures pointing to a 70% chance that the Fed is done rallying. The market also has over 120 basis points of price cuts for next year starting around March.

Minutes from the last meeting of the Federal Reserve are due on Wednesday and may show that members want to keep their options open on further advances.

Analysts at Goldman Sachs argue that the market has gone too far in pricing in aggressive easing.

“The impetus for a cut outside of a recession will be the normalization of the money rate from a restricted level to neutral once inflation approaches the target,” they wrote in a note.

“Normalization is not a particularly pressing driver for a cut, which is why we also see a significant risk that the Fed will instead hold steady.”

They expect cuts of just 25 basis points per quarter starting in the second quarter of next year, with the interest rate eventually settling at 3-3.25%.

The resilience of the economy combined with truly massive government borrowing requirements kept the 10-year Treasury yield up at 4.18%, after a 12 basis point rise last week.

This rise pushed the dollar against the low-yielding yen, raising it to 145.22, the highest level it had not seen since November last year. Then concerns about possible intervention returned to 144.95.

The Euro actually reached its highest levels since late 2008 and settled at 158.51 Yen. The single currency was more restrictive on the dollar at $1.0933.

A rising dollar and yields were pressuring gold at $1,911 an ounce, after falling for three consecutive weeks.

Oil prices are going the other way as tight supply meets expectations of strong demand for seven straight weeks of gains.

Monday saw some profit-taking that pushed Brent down 36 cents to $86.45 a barrel, while US crude fell 31 cents to $82.88 a barrel.

Reporting from Wayne Cole. Editing by Shri Navaratnam and Sam Holmes

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