SHANGHAI: Most Asian stock markets rose on Monday, but gains were limited as investors awaited U.S. retail sales data and corporate earnings to gauge the health of the world’s biggest economy ahead of a likely U.S. rate cut later this month.
European markets looked set for an equally cautious session, with pan-region Euro Stoxx 50 futures down 0.14% in early trade.
German DAX futures were up 0.04%, FTSE futures were down 0.18%, and financial spreadbetters saw France’s CAC 40 opening flat.
MSCI’s broadest index of Asia-Pacific shares outside Japan was last up 0.3%, with losses in Chinese shares capping gains elsewhere in the region.
China’s blue-chip CSI300 index fell 0.3% as investors fretted over slower growth in the world’s second-largest economy and the impact of the Sino-U.S. trade war, even as new data highlighted Beijing’s efforts to boost spending.[.SS]
South Korea’s KOSPI added 0.4% after a slow start, and shares in Taiwan rose 0.1%.
The Australian market shed 0.1%, unmoved by the release of dovish minutes from the Reserve Bank of Australia’s July meeting.
Japan’s Nikkei stock index ended down nearly 0.7%.
Encouraging Chinese June data on Monday had provided some relief to investors worried about the economic outlook, but pressure on global business and investment from the trade war and slowing world growth are reinforcing expectations of policy easing by major central banks.
“A U.S. rate cut should make it easier for central banks in Asia to ease their policies, boosting domestic demand in the region,” said Yukino Yamada, senior strategist at Daiwa Securities.
“We still don’t know what to expect from the U.S.-China trade war … But there are vague expectations that Trump will be quiet during summer and the issue will be put on the back burner until near China’s National Day (in early October),” she said.
Overnight, U.S. President Donald Trump showed no signs of softening his stance on China, warning that Washington could pile on more pressure as trade talks sputtered along.
U.S. data on Tuesday is expected to show that retail sales rose 0.1% in June, according to the median estimate of economists polled by Reuters. But a decline in net interest margin reported by Citigroup in its mixed quarterly report underlined risks for financial firms in a lower interest rate environment.
That decline partly overshadowed better-than-expected profit numbers, triggering a fall in shares of other banks on concerns that it would presage lower profits across the industry.
“Clearly the biggest risk to the most recent rally is the earnings season,” said Ryan Felsman, senior economist at CommSec in Sydney.
Signs of trade tensions weighing on corporate profits and the fading impact of tax cuts would underscore the U.S. Federal Reserve’s concerns over slowing investment, he said.
“That feeds into the narrative of concerns around the global economy, the slowing in the U.S. economy, but also the need for potentially more aggressive rate cuts from the Fed to support the U.S. economy going forward,” Felsman said.
Markets have fully priced in a 25-basis point cut by the Fed at its meeting at the end of this month.
The quiet Asian trading session followed an equally subdued day on Wall Street, with the Dow Jones Industrial Average rising 0.1%, the S&P 500 gaining 0.02% and the Nasdaq Composite adding 0.17%.
SLIGHT FLATTENING
Signs of an improving economic situation in the United States have led to a steepening of the U.S. yield curve, led by higher longer-dated yields.
That reversed slightly on Tuesday, with the yield on benchmark 10-year Treasury notes turning higher to 2.0973% compared with its U.S. close of 2.092% on Monday.
The two-year yield, closely watched as a gauge of traders’ expectations for Fed fund rates, gained faster, rising to 1.8416% compared with a U.S. close of 1.833%.
In the currency market, the dollar was up 0.09% against the yen at 108.00, and the euro ticked up 0.04%, buying $1.1261.
The dollar index, which tracks the greenback against a basket of six major rivals, was a touch stronger at 96.962.
Oil prices steadied after earlier easing on signs that the impact of a tropical storm on U.S. Gulf Coast production would be short-lived.
Global benchmark Brent crude was flat at $66.48 per barrel, and U.S. West Texas Intermediate (WTI) crude dipped 0.12% to $59.51 per barrel.
Trade-in gold echoed the cautious tone of equity markets ahead of U.S. data. The precious metal was last down 0.03% on the spot market at $1,413.20 per ounce.
It doesn’t suit me so I want to leave.