18-7-2023 (HONG KONG) Asian stocks fell on Tuesday due to weak Chinese economic data released the previous day, continuing to weigh on investor sentiment. Meanwhile, investors await U.S. retail sales data to determine the path for U.S. interest rates.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.63% in the morning session. The readings on U.S. retail sales and U.S. industrial production to be released on Tuesday are expected to provide stronger signs of inflation cooling. Economists predict that retail sales in June will show a 0.5% rise from May.
Gary Ng, Senior Economist at Natixis Corporate and Investment Bank, said, “This week we have a number of US economic data that will give a clear indication of whether further rate hikes are needed.” The U.S. Federal Reserve, European Central Bank, and Bank of Japan are holding policy reviews next week.
The Hong Kong stocks were catching up with the fall in Chinese stocks triggered by data showing that the post-pandemic bounce in China’s economy was over, with quarter-on-quarter growth of 0.8% in the second quarter. The benchmark Hang Seng index fell 1.74%, while the technology sector dropped 1.89%. China A shares were down 0.4% in the early session on Tuesday. However, Japan’s Nikkei eked out a gain of 0.18%.
Investors expect the European Central Bank and the Bank of England to extend their rate-hike cycle, causing the dollar to weaken. Money markets have largely priced in a 25-basis-point rate hike from the Fed at its policy meeting later this month, with expectations that rates will come down as early as December.
The U.S. dollar index dipped slightly to 99.85 in early Asia trade, having struck its lowest since April 2022 on Friday. The euro firmed 0.11% to $1.1246. Benchmark 10-year notes were flat, with a yield of 3.7989%.
U.S. crude rose 0.22% to $74.31 per barrel, and Brent was at $78.64, up 0.18%. Spot gold added 0.1% to $1,957.50 an ounce. U.S. gold futures were up by 0.26% at $1,960.19 an ounce.
