Stocks dip as China, Middle East conflict weigh: Markets wrap

Stocks in Asia slipped as uncertainties lingered in the Middle East and markets digested the possibility of further rate hikes by the Federal Reserve. Better-than-expected China data failed to dispel concerns over the country’s economic outlook.

US stock futures edged lower and European contracts fell, while gold and oil resumed rallies after the planned summit between President Biden and Arab leaders was canceled following a Gaza hospital attack. Traders also awaited UK CPI data later Wednesday to help gauge the Bank of England’s rate path.

Hong Kong’s equity indexes erased a brief rally spurred by a slew of economic data beats, pointing to still-fragile sentiment. China’s economic growth and retail sales suggested the economy is finding a foothold, while the property market remained a drag.

“I don’t think market will be confident on growth just from one round of improved macro data,” said Xin-Yao Ng, an investment director for Asian equities at abrdn. “Investors will still be watching for company results and stimulus from the government to drive confidence.”

Distressed Chinese builder Country Garden Holdings Co signaled it is set for its first-ever default as a grace period is ending for dollar-bond interest. Its shares pared an earlier gain. Meanwhile, an index of China’s property developers headed for its lowest since 2009, as stress in the sector continues to rise amid slumping home sales and deepening debt woes for major developers.

Treasuries steadied in Asian trading after two-year yields hit the highest since 2006 in the previous session as strong US data reinforced the higher-for-longer rates narrative. Swap contracts tied to Fed rate decisions showed traders are pricing in more than 60% odds that policymakers will raise interest rates by a quarter percentage point in January.

Oil extended gains as West Texas Intermediate rose above $88 a barrel, following the hospital explosion. The global oil market has been rocked by the Middle East crisis with the possibility of a wider conflict endangering crude flows.

Israel blamed a failed missile from militant group Palestinian Islamic Jihad for the blast, potentially the deadliest since the killing of 1,300 Israelis in the Oct. 7 attack by Hamas, which is designated a terrorist organization by the US and European Union. The Pentagon said it didn’t have information on who was responsible and the US called for an investigation.

The Bank of Japan announced unscheduled bond purchases after the nation’s 10-year yield touched a fresh decade-high. Japan’s sovereign debt has faced renewed selling pressure amid speculation that the central bank will tweak is ultra-easy monetary policy sooner rather than later. The BOJ is likely to discuss raising its inflation projection at its policy meeting later this month, according to people familiar with the matter.

US retail sales exceeded all forecasts and industrial production strengthened last month, fresh evidence of a resilient American consumer whose spending is helping stabilize manufacturing. The reports prompted a slew of economists, from Goldman Sachs to JPMorgan Chase & Co. and Morgan Stanley, to boost their tracking estimates for third-quarter gross domestic product.

Key events this week:

• UK CPI, Wednesday
• Eurozone CPI, Wednesday
• Morgan Stanley, Netflix, Tesla earnings, Wednesday
• Federal Reserve issues Beige Book economic survey, Wednesday
• Philadelphia Fed President Patrick Harker and New York Fed President John Williams speak at separate events, Wednesday
• Australia unemployment, Thursday
• Japan trade, Thursday
• China property prices, Thursday
• US initial jobless claims, existing home sales, leading index, Thursday
• Federal Reserve Chair Jerome Powell, Chicago Fed President Austan Goolsbee, Atlanta Fed President Raphael Bostic, Philadelphia Fed President Patrick Harker, Dallas Fed President Lorie Logan speak at different events, Thursday
• Japan CPI, Friday
• China loan prime rates, Friday
• Philadelphia Fed President Patrick Harker speaks, Friday

Stocks

• S&P 500 futures fell 0.1% as of 6:41 a.m. London time. The S&P 500 was little changed.
• Nasdaq 100 futures fell 0.2%. The Nasdaq 100 fell 0.3%
• Japan’s Topix rose 0.2%
• Hong Kong’s Hang Seng was little changed
• The Shanghai Composite fell 0.7%
• Euro Stoxx 50 futures fell 0.1%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0579
• The Japanese yen was little changed at 149.69 per dollar
• The offshore yuan rose 0.1% to 7.3168 per dollar
• The Australian dollar rose 0.3% to $0.6384
• The British pound was unchanged at $1.2183

Cryptocurrencies

• Bitcoin rose 1.3% to $28,825.25
• Ether rose 1% to $1,575.88

Bonds

• The yield on 10-year Treasuries was little changed at 4.83%
• Japan’s 10-year yield advanced 2.5 basis points to 0.805%
• Australia’s 10-year yield advanced 10 basis points to 4.65%

Commodities

• West Texas Intermediate crude rose 2% to $88.38 a barrel
• Spot gold rose 0.8% to $1 938.89 an ounce