Asia shares fall as China PMI data dents sentiment: Markets Wrap

(Bloomberg) — Asian shares fell Wednesday as growth in China’s services industry slowed, underscoring concerns over the tepid recovery in the world’s second-largest economy.

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A region-wide gauge of shares fell 0.5%, as shares also fell in Japan, South Korea and Australia. Futures for benchmarks in the US and Europe were lower.

Early losses in Chinese shares deepened and the offshore yuan reversed an advance after the Caixin China Services Purchasing Managers Index was weaker than expected. The yuan’s fall came despite the central bank previously maintaining its support for the currency in its daily settlement.

“This brings the focus back to slowing growth momentum and the recent rise in geopolitical anxiety,”[ads1]; said Charu Chanana, market strategist at Saxo Capital Markets.

In Japan, Rakuten Group Inc. shares fell on news that the e-commerce company took a step to list its online brokerage arm. The stock fell as much as 2.9% on market concerns over debt levels, before returning to positive territory.

The yield on the two-year Treasury fell around four basis points to 4.9% when trading resumed on Wednesday after the US Independence Day holiday. The 10-year yield fluctuated around 3.84%.

The two-year yield on Monday exceeded the 10-year yield by the largest amount since March, when the key 2s10s segment of the yield curve became the most inverted since the 1980s.

The yen settled on the stronger side of the 145 level against the dollar on Wednesday after a bout of weakness that has sparked jitters among politicians in Tokyo. The Australian dollar, which is sensitive to China’s outlook, fell after the release of the PMI data.

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Elsewhere, oil weakened after rising more than 2% on Tuesday on production cuts in Saudi Arabia and Russia. Traders await potentially critical comments from the Saudi energy minister. Gold was little changed.

After US shares rose sharply in the first half of the year, investors are now worried that higher interest rates and a worsening economic backdrop will limit gains from here. Among warnings, Goldman Sachs Group Inc. strategists wrote that it is too early to dismiss the risk of higher interest rates weighing on stocks.

Not everyone is equally gloomy.

“As we approach a downturn, we want to be more conservative, more high quality tilt,” Tai Hui, market strategist for Asia Pacific at JPMorgan Asset Management, told Bloomberg Television. “But when the economy, all the bad news is washed out, that’s where I think equity will really shine.”

Looking further ahead, Friday’s US non-farm payrolls report will be a key event for markets that hints at the path of monetary policy.

Important events this week:

• Eurozone S&P Global Eurozone services PMI, PPI, Wednesday

• OPEC International Seminar, speakers including OPEC+ oil ministers, starts in Vienna, Wednesday

• The FOMC publishes minutes from the June policy meeting on Wednesday

• New York Fed President John Williams in “fireside chat” at a meeting with the Central Bank Research Association at the New York Fed, Wednesday

• US Initial Jobless Claims, Trade, ISM Services, Vacancies, Thursday

• Dallas Fed President Lorie Logan speaks on a panel on policy challenges for central banks at the CEBRA meeting on Thursday

• US unemployment, non-farm payrolls, Friday

• The ECB’s Christine Lagarde is holding an event in France on Friday

Some of the main features of the markets today:

Stock

• S&P 500 futures were down 0.1% at 1:29 p.m. Tokyo time

• Nasdaq 100 futures fell 0.1 percent

• Japan’s Topix fell 0.2 percent

• Australia’s S&P/ASX 200 fell 0.4 percent

• The Hang Seng in Hong Kong fell 1.4 percent

• The Shanghai Composite fell 0.5 percent

• Euro Stoxx 50 futures fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0877

• The Japanese yen was little changed at 144.48 per dollar

• The offshore yuan fell 0.2% to 7.2397 per dollar

• The Australian dollar fell 0.1% to $0.6683

Cryptocurrencies

• Bitcoin rose 0.2% to $30,862.37

• Ether fell 0.2% to $1,938.51

Bonds

Raw materials

This story was produced with assistance from Bloomberg Automation.

–With assistance from John Cheng.

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