Growth risks weigh on stocks, oil as bonds climb: markets wrap

Mounting signs of a sharp economic slowdown weighed on stocks in Asia as well as commodity prices while supporting sovereign bonds.

An Asia-Pacific equity index retreated, dragged down by Chinese tech shares on a report that social media giant Tencent Holdings Ltd. plans to sell all or a bulk of its $24 billion stake in food delivery firm Meituan in part to appease regulators.

S&P 500 and Nasdaq 100 contracts edged lower, European contracts made modest gains and a dollar gauge was firm.

US data Monday pointed to rapidly cooling manufacturing and slumping homebuilder sentiment, adding to economic risks after weak Chinese figures.

Demand for havens helped Treasuries sustain an advance and spurred purchases of Australian and New Zealand debt. Oil slid below $89 a barrel on worries about demand as well as the possible return of Iranian supplies.

Bets on cooling inflation and less punitive monetary tightening as the world economy slows have contributed to a near 13% rebound in global equities from June lows. The danger for the bounce lies in the possibility of persistent price pressures that keep borrowing costs higher for longer, leading to recession.

The Federal Reserve minutes this week will probably give a hint of the scale of the next interest-rate hike, Jin Yuejue, multi-asset solutions investment specialist at JPMorgan Asset Management, said on Bloomberg Radio.

“We’re of the view that there’s more work for Fed to do,” she said, adding she expects the US to raise rates by another 100 basis points this year.

Poor data

US data showed a gauge of New York state manufacturing activity plunged by the second-most in figures going back to 2001. US homebuilder sentiment fell for an eighth-straight month, the worst stretch since the 2007 housing collapse.

Those reports followed an unexpected cut in interest rates by China on Monday ahead of figures showing the nation’s economic slowdown deepened in July. The offshore yuan stabilized after sinking in the wake of the disappointing data and monetary steps.

“The risk of the markets going below the June lows is quite high,” Shane Oliver, head of investment strategy at AMP Services Ltd., said on Bloomberg Television. Sagging economic data presage “weaker” US earnings, he added.

Here are some key events to watch this week:

• Earnings include Walmart, Target, Home Depot, Tencent
• Federal Reserve July minutes, Wednesday
• New Zealand rate decision, Wednesday
• UK CPI, US retail sales, Wednesday
• Australia unemployment, Thursday
• U.S. existing home sales, initial jobless claims, Conference Board leading index, Thursday
• Fed’s Esther George, Neel Kashkari speak at separate events, Thursday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.2% as of 7:48 a.m. in London. The S&P 500 rose 0.4%
• Nasdaq 100 futures retreated 0.2%. The Nasdaq 100 rose 0.8%
• Japan’s Topix index slipped 0.2%
• South Korea’s Kospi index climbed 0.2%
• Hong Kong’s Hang Seng index slid 1.3%
• China’s Shanghai Composite index was steady
• Australia’s S&P/ASX 200 index was up 0.6%
• Euro Stoxx 50 futures added 0.3%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was at $1.0157
• The Japanese yen was at 133.40 per dollar, down 0.1%
• The offshore yuan was at 6.8083 per dollar, up 0.1%

Bonds

• The yield on 10-year Treasuries fell one basis point to 2.78%
• Australia’s 10-year yield dropped 14 basis points to 3.22%

Commodities

• West Texas Intermediate crude fell 1% to $88.49 a barrel
• Gold was at $1 780.99 an ounce