China stocks fall on stimulus worry; dollar gains: Markets wrap

Chinese stocks declined, a sign that traders are increasingly pricing in the lack of major stimulus from the government amid a slump in the economy. Equity markets in the rest of Asia climbed, pacing US gains.

Shares in Hong Kong and mainland China were the worst performers in the region and forced a gauge of Asian shares enter a third day of losses. The offshore yuan also fell to the weakest level in more than a week.

Investors see no easy fix to China’s economic slump, with fresh signs of financial stress among the nation’s dollar-bond issuers. Economists say Beijing’s plan to boost consumption won’t meaningfully bolster the recovery and are shifting their focus to potential measures from the Politburo meeting later this month.

“The market pessimism around Chinese equities is probably at a level of extreme,” John Lin, chief investment officer of China equities at AllianceBernstein, said on Bloomberg Television. “At this point, little policies probably aren’t enough. You need something bigger, something to sort of shock people out of the slumber.”

European equity futures advanced while contracts for their US counterparts were flat. Markets in the US closed near session highs on Tuesday, as results from Bank of America Corp. and Morgan Stanley bolstered bank shares and a rally in equities linked to artificial intelligence resumed.

As trading gets underway in Europe, investors will be keeping a close eye on inflation data for the eurozone due later Wednesday. European bonds gained after European Central Bank Governing Council member Klaas Knot said monetary tightening beyond next week’s meeting is anything but guaranteed.

In the UK, both headline and core inflation came in below estimates. The pound fell.

ASML Holding NV — Europe’s most valuable technology company — reported order bookings that beat estimate in April to June period. The figure was also 20% higher from the previous quarter.

Meanwhile, a gauge of dollar strength ticked higher with Treasuries. US notes ended Tuesday mixed, with the yield on the policy-sensitive two-year security rising and the 10-year benchmark’s rate falling. In the swaps market, traders fully priced in a quarter-point hike at next week’s Federal Reserve meeting.

“If we try to move away from rate expectations and fundamentals, it’s been a great technical move” for the greenback, Claudio Piron, co-head of Asia FX and rates strategy at Bank of America, said on Bloomberg Television. “But I think it’s a bit oversold and we’d expect the dollar to regroup and be a bit firmer over the next couple of months.”

The yen weakened for a second day following Bank of Japan Governor Kazuo Ueda’s comment that it would maintain monetary easing unless there is a shift in its price goal view.

On the earnings front later Wednesday, Goldman Sachs Group Inc., Netflix Inc. and Tesla Inc. are all scheduled to release results.

“With US economic growth still robust in Q2 and the US dollar weakening modestly further,” earnings estimates could again prove conservative this quarter “and we could see companies deliver material earnings beats, on average,” strategists at JPMorgan Chase & Co., including Daniel Motoc and Bram Kaplan, wrote in a note.

Elsewhere, oil fell after rising more than 2% in the previous session on signs Russia is making good on its pledge to curb supplies. Gold hovered around its highest level since May.

Key events this week:

• Eurozone, UK CPI, Wednesday
• US housing starts, Wednesday
• China loan prime rates, Thursday
• US initial jobless claims, existing home sales, Conf. Board leading index, Thursday
• Japan CPI, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 7:03 a.m. London time. The S&P 500 rose 0.7%
• Nasdaq 100 futures were little changed. The Nasdaq 100 rose 0.8%
• Japan’s Topix rose 1.2%
• Australia’s S&P/ASX 200 rose 0.5%
• Hong Kong’s Hang Seng fell 0.5%
• The Shanghai Composite was little changed
• Euro Stoxx 50 futures rose 0.5%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%
• The euro was little changed at $1.1225
• The Japanese yen fell 0.4% to 139.39 per dollar
• The offshore yuan fell 0.3% to 7.2151 per dollar
• The Australian dollar fell 0.2% to $0.6795
• The British pound fell 0.4% to $1.2978

Cryptocurrencies

• Bitcoin rose 1.1% to $30 108.51
• Ether rose 1% to $1,914.15

Bonds

• The yield on 10-year Treasuries declined four basis points to 3.75%
• Australia’s 10-year yield declined 11 basis points to 3.87%

Commodities

• West Texas Intermediate crude was little changed
• Spot gold was little changed