Asian stock markets faced a decline on Monday, with Chinese shares leading the downturn, following disappointing retail sales data that highlighted continued struggles within the world’s second-largest economy. The MSCI Asian equity index fell for a second consecutive day, while major benchmarks in Australia and Japan also posted losses. Materials and consumer discretionary stocks were among the worst performers, while Asian currencies hit a two-week low. Meanwhile, US equity futures saw slight gains as traders braced for the Federal Reserve’s policy decision later this week. Bitcoin surged to a fresh all-time high.
China’s retail sales grew by just 3% year-over-year, missing economists’ forecast of a 5% increase. The lackluster performance came after Beijing had promised to stimulate consumption, but failed to announce substantial fiscal stimulus measures. The poor retail data, alongside previous market declines, further dampened sentiment, with Saxo Markets’ Charu Chanana describing the situation as a reflection of China’s ongoing economic challenges. “Stimulus efforts have prioritized optics over delivering meaningful economic improvements,” Chanana stated.
The setback for Chinese stocks came after a recent slump, triggered by Beijing’s vague pledge to support the economy without offering concrete measures.
Korean stocks also turned negative after initially opening higher, in the wake of the impeachment of President Yoon Suk Yeol on Saturday. The ruling party’s leader, Han Dong-hoon, announced his resignation following mounting pressure. While analysts expect short-term relief due to the resolution of immediate political uncertainty, Morgan Stanley’s Kathleen Oh cautioned that the broader impact on the economy could remain limited, with the risk of longer-term instability if political tensions persist.
The bearish sentiment in Asia was further compounded by expectations of a busy week of central bank meetings. Investors are positioning themselves ahead of decisions by the Federal Reserve, Bank of Japan, and Bank of England, while global stock markets, which have rallied nearly 20% this year, could see some profit-taking.
In the currency markets, the Bloomberg Dollar Index dipped slightly after two consecutive weeks of gains, and US Treasury yields rose as traders anticipated the Fed’s rate decision. Market expectations are now focused on potential rate cuts by the Fed over the next 12 months, a shift from last week’s projections.
Meanwhile, in Europe, Moody’s downgraded France’s credit rating to Aa3 from Aa2, adding pressure to an already weakening economic outlook. German Chancellor Olaf Scholz faces a vote of confidence on Monday that could lead to snap elections as the country grapples with stagnating growth. While European equity futures remained largely unchanged, bond markets showed signs of strain, with French and German bond futures declining.
Bitcoin, however, saw a more optimistic outlook, climbing to a record $106,493, exceeding its previous high from earlier this month. The digital currency’s rally provided a boost to the broader crypto market.
In commodities, oil prices softened slightly, retreating from Friday’s gains as ongoing geopolitical tensions in Russia and Iran weighed on sentiment. Meanwhile, gold prices remained stable.
Key Economic Events This Week:
- Eurozone HCOB Manufacturing and Services PMI (Monday)
- ECB President Christine Lagarde Speech (Monday)
- US Rate Decision (Wednesday)
- UK CPI (Wednesday)
- Japan Rate Decision (Thursday)
- US Personal Income and Spending Data (Friday)
Market Summary:
Stocks: S&P 500 futures unchanged, Nikkei 225 futures little changed, Japan’s Topix -0.3%, Australia’s S&P/ASX 200 -0.6%, Hong Kong’s Hang Seng -0.7%
Currencies: Bloomberg Dollar Spot Index unchanged, Euro up 0.1%, Japanese yen and offshore yuan little changed
Cryptocurrencies: Bitcoin +1.8% to $104,640, Ether +2.5% to $3,953
Bonds: US 10-year yield down to 4.38%, Japan’s 10-year yield up to 1.060%, Australia’s 10-year yield up to 4.32%
Commodities: WTI crude down 0.6%, Spot gold up 0.2%
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