Asia shares slip further Tuesday morning as China casts a pall, dollar's slide abates
Business
Investors are waiting for stronger signs of inflation cooling
HONG KONG (Reuters) – Asian stocks fell on Tuesday as weak Chinese economic data released the previous day continued to weigh on sentiment, while investors were waiting to see if US retail sales data would shine a light on the path for US interest rates.
MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.63 per cent in the morning session.
Investors are waiting for stronger signs of inflation cooling, with the readings on US retail sales and US industrial production to be released later on Tuesday. Economists reckon retail sales in June will show a 0.5pc rise from May.
"People think of the tug of war between growth and inflation still. This week we have a number of US economic data that will give a clear indication on whether further rate hikes are needed," said Gary Ng, senior economist at Natixis Corporate and Investment Bank.
The US Federal Reserve, European Central Bank and Bank of Japan are holding policy reviews next week.
After the cancellation of trading on Monday due to a typhoon, Hong Kong stocks were catching up with the fall in Chinese stocks triggered by data showing the post-pandemic bounce in China's economy was over, with quarter-on-quarter growth of 0.8pc in the second quarter.
Ng said Asian investors were struggling to find some positivity after the "very poor Chinese economic data".
The benchmark Hang Seng index dropped 1.74pc while the technology sector fell 1.89pc. China A shares were down 0.4pc during early session on Tuesday. Japan's Nikkei, however, eked out a gain of 0.18pc.
A possible divergence of US Federal Reserve and European Central Bank on rate hikes has recently caused dollar to weaken.
Money markets have largely priced in a 25-basis-point rate hike from the Fed at its policy meeting later this month, though there are expectations that rates will come down as early as December.
Conversely, investors expect the European Central Bank and the Bank of England to extend their rate-hike cycle.
The Bank of Japan (BOJ) holds its monetary policy meeting next week, with investors on the lookout for whether it will start phasing out its ultra-dovish policy stance.
The US dollar index dipped slightly to 99.85 in early Asia trade, having struck its lowest since April 2022 on Friday. The euro firmed 0.11pc to $1.1246.
Benchmark 10-year notes were flat, with a yield of 3.7989pc.
US crude rose 0.22pc to $74.31 per barrel and Brent was at $78.64, up 0.18pc.
Spot gold added 0.1pc to $1,957.50 an ounce. US gold futures were up by 0.26pc at $1,960.19 an ounce.
