Asian Equities Decline; Yen Breaches Key Level: Markets Wrap

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(Bloomberg) — Equity benchmarks fell across Asia after Wall Street capped off a poor week on a down note and as China’s worsening property slump continued to dampen market sentiment.

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Stocks in Hong Kong fell around 2% at the open, with the shares of Country Garden Holdings Co. declining as much as 12%. The CSI 300 Index, which is the benchmark of onshore Chinese shares, extended its decline after capping its worst week since March on Friday amid signs of deterioration in the economy while the offshore yuan hovered near its weakest level this year.

Country Garden, once China’s largest private-sector developer by sales, is in the spotlight as the company is at risk of joining a slew of defaulters and the latest economic data for the nation is likely to show little sign of a rebound in growth.

Meanwhile in Japan, the yen breached its year-high level of 145.07 versus the dollar as investors started to monitor for any signs the government may intervene as it did last year. The currency weakened for five straight days through Friday while an index of dollar strength has advanced over the last four weeks with elevated Treasury yields.

“Lack of verbal intervention so far suggests potential patience from them,” strategists at Saxo Capital Markets, including Charu Chanana, said of possible currency intervention by Japan’s officials in a note. “This week’s GDP and CPI data in Japan could be key, as will be the US data such as retail sales which, if firmer, could continue to push yields higher.”

Treasuries extended their declines after producer prices in the US on Friday increased more than expected, threatening to help keep rates higher for longer. Yield on New Zealand’s 10-year bond rose to the highest since 2011, following the moves in the US bonds.

“Overvalued”

The US trading session on Friday saw a slide in tech megacaps and mixed economic data left stocks weak and struggling for direction. In choppy trading, the S&P 500 closed at a one-month low with a drop of just 0.1%. The Nasdaq 100 notched its longest weekly losing streak this year, hovering around 15,000. Nvidia Corp. — which has more than tripled in 2023 — extended a four-day decline to 10%.

Bill Gross, the one-time bond king, said stock and Treasury bulls are wrong as both markets are “overvalued.”

The former chief investment officer of Pacific Investment Management Co. told Bloomberg Television that the fair value of the 10-year Treasury yield is about 4.5%, compared with the current level of 4.15%.

Meantime, Friday’s economic reports did little to alter swap market bets that the Federal Reserve will pause its rate hikes next month. Traders also continued to expect the central bank to signal its battle against inflation isn’t over yet.

Consumer inflation expectations as measured by the University of Michigan unexpectedly fell in early August, despite higher gasoline and grocery costs. Meantime, producer prices grew last month by more than expected, primarily due to increases in certain service categories.

Goldman Sachs Group Inc. economists, however, anticipate the Fed will start lowering interest rates by the end of next June, with a gradual, quarterly pace of reductions from that point.

Oil dipped Monday after posting its longest streak of weekly gains since mid-2022. Multiple reports forecasting increased demand gave a fresh boost to a rally built on increased supply-disruption risks and extended Saudi production cuts.

Key events this week:

  • China medium-term lending, retail sales, industrial production, fixed-asset investment, FX net settlement, Tuesday

  • Japan industrial production, GDP, Tuesday

  • UK jobless claims, unemployment, Tuesday

  • US retail sales, empire manufacturing, business inventories, cross-border investment, Tuesday

  • Reserve Bank of Australia policy minutes, Tuesday

  • Federal Reserve Bank of Minneapolis President Neel Kashkari speaks, Tuesday

  • China property prices, Wednesday

  • Eurozone industrial production, GDP, Wednesday

  • UK CPI, Wednesday

  • US FOMC minutes, housing starts, industrial production, Wednesday

  • US initial jobless claims, US Conf. Board leading index, Thursday

  • Eurozone CPI, Friday

  • Japan CPI, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures were little changed as of 10:48 a.m. Tokyo time. The S&P 500 fell 0.1% Friday

  • Nasdaq 100 futures were little changed. The Nasdaq 100 fell 0.7%

  • Japan’s Topix fell 0.3%

  • Australia’s S&P/ASX 200 fell 0.4%

  • Hong Kong’s Hang Seng fell 1.9%

  • The Shanghai Composite fell 0.8%

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro fell 0.1% to $1.0935

  • The Japanese yen was unchanged at 144.96 per dollar

  • The offshore yuan fell 0.1% to 7.2707 per dollar

  • The Australian dollar fell 0.4% to $0.6473

Cryptocurrencies

  • Bitcoin fell 0.6% to $29,235.43

  • Ether fell 0.7% to $1,839.58

Bonds

  • The yield on 10-year Treasuries advanced three basis points to 4.18%

  • Japan’s 10-year yield advanced 3.5 basis points to 0.620%

  • Australia’s 10-year yield advanced nine basis points to 4.21%

Commodities

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Rita Nazareth and Brett Miller.

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