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SYDNEY (Reuters) – Asian stocks started the week on a more subdued note on Monday after posting their first weekly dip since the start of June, as the dollar was on the defensive ahead of China's key economic data.
PHOTO FILE: Investors examine screens showing stock market information in a brokerage house in Shanghai, China, May 6, 2019. REUTERS / Aly Song
Trade should be light, Japan being closed for a holiday.
The broadest MSCI index of Asia-Pacific equities outside Japan declined slightly to 524.9 points. It dropped by just over 1% last week after five consecutive weeks of gains.
Australian equities declined 0.8%, while South Korea's KOSPI declined 0.3%.
Markets will focus on Chinese GDP data expected at 0200 GMT, where badysts expect Q2 growth to slow to 6.2% from the previous year – the lowest annual rate since the beginning of 1992.
A disappointing figure would fuel worries about slowing global growth and bolster arguments for an increased stimulus from Chinese authorities as a damaging trade war with the United States rages on.
In addition to GDP, China will also release activity data for June, including retail sales, industrial production and urban investment, which could give more clues as to whether Earlier support measures are starting or if a relaxation of the policy is needed.
"The sluggishness that weighs on the Chinese economy may not disappear quickly due to difficulties on the domestic front and outside," said ANZ badysts.
"To stabilize growth, the People's Bank of China (PBoC) will maintain an accommodating bias for the rest of the year, in our view."
Later in the week, US retail and industrial production data will provide more clues to the health of the world's largest economy. The US Federal Reserve will release its 'Beige Book' on Wednesday so investors know how trade tensions have affected trade prospects.
In the currency markets, the greenback was stable at 97.818 against a basket of major currencies.
The dollar index fell for three consecutive days as markets fully anticipated a 25 basis point (bps) cut in US interest rates. There is also a low probability of a 50 bp cutoff.
Against the Japanese yen, the dollar touched the lowest since early June at 107.81, while the single currency remained virtually unchanged at 1.1271 dollars after three sessions of successive gains.
Expectations that the Fed will maintain its favorable rates have pushed the US Treasury bonds to recover over 10 years under the current range of Fed rates ranging from 2.25% to 2.2%. <0#FF:>
"The dubious rhetoric of the Fed has made the reduction of the interest rate in July, in the eyes of the market, as a fait accompli: it's not if they cut, but by how much," said Morgan Stanley's strategist, Hans Redekar, on a note.
Redekar said the bank was returning to its short dollar / yen long position.
"If the markets are disappointed, the yield curve will likely flatten, the US dollar will strengthen and financial conditions will tighten. These forces would exacerbate the already considerable headwinds that weigh on the global economy, "he added.
"Global reflation requires a lower USD to support world trade and commodity prices."
Concerns over global growth and low inflation have pushed investors to accumulate money on bonds and money market funds, said Jefferies, citing his global tracker of badet flow .
"The danger is that with a mountain of cash in money market funds, a commercial ceasefire would lead to a significant slide in secure badets," said Sean Darby, global equity strategist at Jefferies.
"At the moment, investors do not seem particularly eager to buy stock.Revisions earnings have not yet reached their low point, while the economic surprises are rare," he said. he added.
"The bottom line is that we put a break on the risk rally."
US crude fell 6 cents to 60.15 dollars a barrel. Brent was down 7 cents to $ 66.65.
Gold was a little higher at 1,416.14 ounces, not far from a $ 1,438.60 high over six years.
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