(Bloomberg) — Asian stocks and currencies tumbled as signs of fading momentum in China’s economy added to angst over elevated US interest rates and tensions in the Middle East.
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The MSCI Asia Pacific Index slid the most since August, with every major market seeing losses, after a slew of China’s economic indicators showed that the nation’s economic recovery remains patchy. Futures contracts for US and European equities fell in Asian trading after the S&P 500 slid more than 1% in a volatile session overnight following robust retail sales data.
A global gauge of emerging market currencies dropped, with South Korea’s won and the Indonesia rupiah weakening to multi-year lows. Traders also blamed the yuan’s fall for the regionwide selloff after China unexpectedly weakened its defense as a resurgent dollar and poor sentiment pushed it toward a policy red line.
“The carnage is the result of a perfect storm: stretched positioning across global equity indexes, a third successive month of firm US inflation data contributing to unease within a deeply troubled bond market against the rising risk of miscalculation and escalation in the Middle East,” said Tony Sycamore, market analyst at IG Australia.
A slew of China’s economic data points showed that the nation’s economic rebound remains uneven. While both gross domestic product and fixed assets investment beat forecasts, data on retail sales and industrial output fell short of estimates.
“China data appears to be strong on the headline, but the details are weak,” said Charu Chanana, head of foreign-exchange strategy at Saxo Markets in Singapore. “This would suggest that the economy needs more support, and markets will continue to position for a weak yuan.”
A gauge of the dollar climbed to its highest level since November. The resurgent strength in the currency, driven by haven demand amid rising geopolitical tensions in Middle East, wreaked havoc across Asia.
Indonesia’s rupiah weakened past 16,000 per dollar for the first time since 2020, prompting the nation’s central bank to intervene. The South Korean won dropped to its lowest since 2022, while the Indian rupee tumbled to a record low against the dollar.
The Japanese yen remained under pressure, after surging to a new 34-year low against the dollar overnight.
West Texas Intermediate rose in Asia after reclaiming its $85 mark on Monday. Top Israeli military officials reiterated the country has no choice but to answer Iran’s weekend attack. Gold was steady.
Treasuries steadied in Asian trading after the 10-year yields spiked on Monday, while those on two-year notes came close to 5%. Bonds were also under pressure as JPMorgan Chase & Co. and Wells Fargo & Co. tapped the US high-grade bond market, the first in a likely parade of bond sales from banks after results.
US retail sales rose by more than forecast in March and the prior month was revised higher, showcasing resilient consumer demand that keeps fueling a surprisingly strong economy. As long as a robust labor market supports household demand, there’s a risk that inflation will become entrenched.
Key events this week:
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Germany ZEW survey expectations, Tuesday
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US housing starts, industrial production, Tuesday
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Morgan Stanley, Bank of America earnings, Tuesday.
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Fed Vice Chair Philip Jefferson speaks, Tuesday
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BOE Governor Andrew Bailey speaks, Tuesday
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IMF publishes its latest world economic outlook, Tuesday
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Eurozone CPI, Wednesday
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Fed issues its Beige Book, Wednesday
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Cleveland Fed President Loretta Mester speaks, Wednesday
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Fed Governor Michelle Bowman speaks, Wednesday
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BOE Governor Andrew Bailey speaks, Wednesday
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Taiwan Semiconductor earnings, Thursday
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US Conf. Board leading index, existing home sales, initial jobless claims, Thursday
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Fed Governor Michelle Bowman speaks, Thursday
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New York Fed President John Williams speaks, Thursday
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Atlanta Fed President Raphael Bostic speaks, Thursday
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BOE Deputy Governor Dave Ramsden and ECB Governing Council member Joachim Nagel speak, Friday
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Chicago Fed President Austan Goolsbee speaks, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures fell 0.2% as of 1:24 p.m. Tokyo time
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Nasdaq 100 futures fell 0.2%
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Japan’s Topix fell 2.1%
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Australia’s S&P/ASX 200 fell 2.1%
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Hong Kong’s Hang Seng fell 1.9%
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The Shanghai Composite fell 1.4%
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Euro Stoxx 50 futures fell 1.3%
Currencies
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The Bloomberg Dollar Spot Index rose 0.2%
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The euro fell 0.1% to $1.0612
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The Japanese yen was little changed at 154.31 per dollar
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The offshore yuan fell 0.2% to 7.2723 per dollar
Cryptocurrencies
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Bitcoin fell 1% to $62,552.01
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Ether fell 1.4% to $3,040.69
Bonds
Commodities
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West Texas Intermediate crude rose 0.6% to $85.93 a barrel
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Spot gold rose 0.1% to $2,386.50 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Zhu Lin.
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