Downbeat China data, S&P500 Futures prod optimists

• Asia-Pacific equities edge lower as China data, geopolitical concerns flag economic fears.
• China Q2 GDP confirms slowing economic recovery, Sino-US tension remain on the table.
• IMF cites inflation fears despite receding price pressure of late.
• Japan’s holiday limits bond market moves, allowing market to consolidate recent gains amid pre-Fed blackout.

Risk appetite remains sour in the Asia-Pacific zone during early Monday as China data confirms a slowdown in the post-COVID recovery of the region’s biggest economy. Adding strength to the cautious mood are mixed headlines about inflation concerns and Sino-American ties.

Against this backdrop, the MSCI’s index of Asia-Pacific shares outside Japan extends the previous day’s retreat from a five-month high, down 0.20% intraday by the press time. It’s worth noting that the S&P500 Futures print mild losses around 4,535, down 0.10% while extending the previous week’s U-turn from the yearly top.

That said, Japan’s holiday restricts the Asian market’s performance, mainly surrounding the bond moves. Even so, Japanese Finance Minister Sunichi Suzuki’s comments of no discussion on the currency market intervention during the Group of 20 (G20) finance officials’ gathering seem to underpin the Yen pair’s fresh downside.

Elsewhere, China’s second quarter (Q2) 2023 Gross Domestic Product (GDP) came in at 0.8% QoQ versus 0.5% market forecasts and 2.2% prior whereas the GDP YoY figures rose past the previous readings of 4.5% to 6.3%, versus analysts’ estimations of 7.3%. Further, the Industrial Production growth jumped to 4.4% YoY in June, compared to the 2.7% expected and 3.5% prior, whereas the Retail Sales slumped to 3.1% from 12.7% prior and 3.2% market consensus. It should be noted that China’s June survey-based Jobless Rate for 24-year-olds jumped to a record high of 21.3%.

While China data drowned equities from Beijing, typhoon Talim pushed markets in Hong Kong to remain shut while comments from the International Monetary Fund (IMF) renews inflation fears and weighed on the risk appetite amid the pre-Fed blackout period. It should be noted that the economic fears flagged by Australian Treasurer Jim Chalmers join the downbeat statistics from major customer China to print mild losses in Australian and New Zealand equity markets. Furthermore, comments from New Zealand Prime Minister (NZ) Chris Hipkins and US Treasury Secretary Janet Yellen flag looming geopolitical concerns about China and hence weigh on the sentiment, which in turn exerts downside pressure on the markets in New Zealand.

Elsewhere, prices of Gold and crude oil retreat while the US Dollar Index (DXY) pare the biggest weekly loss since November 2022 after Friday’s upbeat US sentiment data and inflation expectations pushed back fears of the Fed’s policy pivot.

Moving on, a light calendar may restrict immediate market moves but a cautious mood ahead of this week’s top-tier data in Asia, namely the RBA Minutes, New Zealand CPI and Japan inflation, could extend the latest pullback.

Also read: Forex Today: Dollar suffers worst weekly loss since November, still vulnerable