(Bloomberg) — Stocks declined Tuesday as the rally in global equities lost momentum and investors fretted over China’s tepid post-pandemic recovery.
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Shares fell from Hong Kong and Shanghai to Tokyo and Seoul while futures for US benchmarks also slipped after Wall Street was shut for a holiday Monday. Australian equities bucked the trend, eking out a small gain.
A rally in Alibaba Group Holding Ltd shares partly reversed an earlier decline of 1.8% following the surprise replacement of its chief executive and chairman.
The broader stock moves pointed to further anxiety about Chinese growth and the lack of fresh stimulus from Beijing. Chinese property companies were among the biggest decliners Tuesday after disappointment at the magnitude of cuts by banks to their lending rates, with the 10-basis points reduction to the five-year rate coming in less than some projections.
“The market was hoping to get a 15-bps cut to the 5-year LPR for any signal of stronger support to the property market,” said Redmond Wong, strategist at Saxo Capital Markets.
The yen weakened to 142 versus the dollar as Japan’s loose monetary policy weighs on the currency. The yuan weakened slightly, taking declines to a third day.
The cost for banks to borrow Hong Kong dollars from each other for a month rose to the highest level since 2007. The move comes after prolonged currency intervention shrank the city’s liquidity pool and demand for cash climbed.
The Australian dollar dropped 0.7% after minutes from the latest central bank decision — when rates were unexpectedly hiked — showed that the case to move in either direction was finely balanced.
Short-term yields on Australian government bonds changed direction and fell after the central bank minutes were released. US Treasury yields rose after a break from trading Monday.
Meanwhile, with the path of Federal Reserve interest rates increasingly uncertain, US traders are vacillating between the lure of the rally and concern it’s exhausted and that the market has become overbought.
Looking ahead, Fed Chair Jerome Powell will give his semi-annual report to Congress on Wednesday. Federal Reserve Bank of St. Louis President James Bullard and his counterparts in New York and Chicago are also among this week’s speakers.
Policymakers at the Fed kept interest rates unchanged at their latest meeting but warned of more tightening ahead. The decision last week came with forecasts for higher borrowing costs of 5.6% in 2023, implying two additional quarter-point rate hikes or one half-point increase before the end of the year.
Elsewhere in markets, gold was little changed while oil fell as China’s plans to support its economy were seen as insufficient to reignite demand.
Key events this week:
US housing starts, Tuesday
Federal Reserve Bank of St. Louis President James Bullard speaks, Tuesday
New York Fed President John Williams speaks, Tuesday
Federal Reserve Chair Jerome Powell delivers semi-annual congressional testimony before the House Financial Services Committee, Wednesday
Federal Reserve Bank of Chicago President Austan Goolsbee speaks, Wednesday
Eurozone consumer confidence, Thursday
Rate decisions in UK, Switzerland, Indonesia, Norway, Mexico, Philippines, Turkey, Thursday
US Conference Board leading index, initial jobless claims, current account, existing home sales, Thursday
Federal Reserve Chair Jerome Powell delivers semi-annual testimony to Congress before the Senate Banking Committee, Thursday
Cleveland Fed’s Loretta Mester speaks, Thursday
Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday
Japan CPI, Friday
US S&P Global Manufacturing PMI, Friday
Federal Reserve Bank of St. Louis President James Bullard speaks, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.3% as of 2:26 p.m. Tokyo time
Nasdaq 100 futures fell 0.4%
Japan’s Topix fell 0.6%
Australia’s S&P/ASX 200 rose 0.8%
Hong Kong’s Hang Seng fell 1.6%
The Shanghai Composite fell 0.3%
Euro Stoxx 50 futures were unchanged
Currencies
The Bloomberg Dollar Spot Index rose 0.1%
The euro was little changed at $1.0916
The Japanese yen was little changed at 142.10 per dollar
The offshore yuan fell 0.2% to 7.1818 per dollar
The Australian dollar fell 0.8% to $0.6794
The British pound fell 0.1% to $1.2774
Cryptocurrencies
Bitcoin rose 0.9% to $26,962.78
Ether was little changed at $1,731.79
Bonds
The yield on 10-year Treasuries advanced four basis points to 3.80%
Japan’s 10-year yield was unchanged at 0.385%
Australia’s 10-year yield advanced five basis points to 4.02%
Commodities
West Texas Intermediate crude fell 1.4% to $70.79 a barrel
Spot gold fell 0.1% to $1,948.25 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Jason Scott, Richard Henderson and Charlotte Yang.
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