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What’s happening: Asia-Pacific stocks closed mostly lower on Monday, as investors digested the latest economic reports from China.
What happened: Stocks markets in Japan remained closed for Marine Day on Monday, while trading was halted in Hong Kong due to Typhoon Talim.
Equity markets in one of the major Asian regions settled higher, with indices in the country hitting fresh all-time highs on Monday.
Why it matters: There had been a rally in Asian tech stocks on expectations of the US Federal Reserve slowing its rate hikes. The gains were somewhat reversed on concerns around a slowdown in the Chinese economy.
China’s equites closed lower on Monday after data showed disappointing growth figures for the second quarter.
Although China’s economy grew by 6.3% year-over-year for the second quarter of 2023, accelerating from the 4.5% expansion recorded in the prior quarter, it missed market expectations of 7.3% growth. The country’s retail sales growth slowed to 3.1% year-over-year in June, the weakest performance since December 2022. This figure also missed market estimates of 3.2%.
The country’s government was expected to announce further stimulus measures to support economic growth. However, the People’s Bank of China held its one-year medium-term lending facility at 2.65% on Monday, which signalled that the central bank would keep its benchmark Loan Prime Rate unchanged later this week.
China’s industrial production topped market expectation, growing by 4.4% year-over-year in June, up from 3.5% in the previous month.
In mainland China, the Shanghai Composite fell 0.87% to close at 3,209.63 on Monday, while the Shenzhen Component declined 0.63% to 11,010.36.
The decline in China’s equities exerted pressure on other Asian markets. South Korea’s KOSPI declined 0.35% on Monday, while Australia’s S&P/ASX 200 slipped around 0.1%, snapping its four-session winning streak.
However, Indian stocks surged to record highs on Monday, driven by broad sectoral gains as the earnings season kicked off. India’s BSE SENSEX jumped 0.80% to settle at 66,589.93.
What to watch: Investors will watch Australia’s jobs data, scheduled for release later this week, which could provide insights into the Reserve Bank of Australia’s upcoming rate decision. The release of Japan’s inflation data on Friday will also remain in focus.
Context: Crude oil futures moved lower on Monday following China’s downbeat economic growth data.
Details: China released weaker-than-expected economic growth on Monday, fuelling concerns around demand strength from the world’s second-largest oil consumer.
Although China’s GDP expanded slower than expected during the second quarter, oil demand grew 14% year-over-year in June.
The muted rebound in China’s growth along with US Fed’s rate hikes negatively impacted oil demand. The US central bank is widely expected to hike its benchmark interest rates again at its July meeting.
A partial resumption of the halted Libyan output also exerted pressure on oil prices. However, both Saudi Arabia and Russia lowering their crude exports limited the overall losses during Monday’s session.
A decline in the US dollar also lent some support to oil prices. The US dollar index, which measures the greenback’s performance versus a basket of major peers, slipped around 0.1% to 99.84 on Monday.
WTI crude oil futures declined by $1.27 to settle at $74.15 per barrel on Monday, while Brent crude for September delivery fell $1.37 to close at $78.50 per barrel. Both oil contracts recorded losses for the second straight session.
In other energy trading, wholesale gasoline for August delivery declined 1 cent to $2.63 a gallon, while August heating oil slipped 4 cents to $2.56 a gallon and August natural gas shed 3 cents to reach $2.51 per 1,000 cubic feet on Monday.
What are expectations: Traders await the release of API’s data on crude oil stockpiles today. US crude stockpiles rose by 3.026 million barrels in the week ended July 7, snapping declines for three consecutive weeks, following a draw of 4.385 million barrels in the earlier week.
Other Markets: European indices closed lower on Monday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index down by 0.38%, 0.23%, 1.12% and 0.63%, respectively.
The White House National Security Council spokesman said that the US will continue to work with other nations to ensure the movement of Ukraine’s grain. The news sent the safe-haven US dollar index slightly lower this morning.
Sri Lanka’s services PMI climbed to 56.7 in June. This being the strongest reading since January 2022 lent support to the LKR/USD forex pair.
Brazil’s IBC-Br index of economic activity declined by 2% in May, following 0.81% growth in the prior month, which sent the BRL/USD pair lower in forex trading this morning.
Canada’s wholesale sales grew 3.5% in May, following a 1.4% decline in the prior month, lending support to the CAD/USD forex pair.
US NY Empire State manufacturing index slipped by 5.5 points to +1.1 in July. However, the figure came in better than market estimates of -4.3 and sent the Nasdaq 100 index higher by around 1% on Monday.
Italy’s construction output, Canada’s inflation rate, industrial producer prices and materials price index, US retail sales, Redbook index, industrial production, manufacturing production, capacity utilization rate, business inventories, NAHB/Wells Fargo Housing market index, net long-term TIC flows, net purchases of US treasury bonds and notes, and net treasury international capital flows, China’s foreign direct investment, Spain’s consumer confidence indicator, as well as Argentina’s economic activity estimator.
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