SINGAPORE (ANN/THE STAR) – Influenced by mixed economic data from China and political uncertainty in Europe, Asian share markets were generally weaker on Monday, which dampened risk appetites and pressured the euro.
Chinese blue-chip stocks dipped by 0.2 per cent, despite retail sales exceeding expectations with a 3.7 per cent rise in May. However, industrial output and fixed-asset investment fell short of forecasts. Additional data revealed that home prices in China declined at the fastest rate in a decade in May, reflecting ongoing challenges in the property sector.
The People’s Bank of China (PBOC) maintained its one-year rate, contrary to some expectations of a rate cut following unexpectedly weak bank lending figures. Despite reports from China’s official Financial News indicating there is still room for rate reductions, internal and external policy constraints remain.
This uncertainty resulted in cautious market behaviour, with MSCI’s broadest index of Asia-Pacific shares outside Japan slipping 0.1 per cent. Japan’s Nikkei fell 1.7 per cent, as investors braced for a six-week wait for more details on the Bank of Japan’s forthcoming tightening measures.
EUROSTOXX 50 futures rebounded by 0.3 per cent after last week’s steep losses, while FTSE futures rose 0.4 per cent. S&P 500 futures remained steady, and Nasdaq futures edged up 0.1 per cent following a series of record highs.
Goldman Sachs analysts have increased their year-end target for the S&P 500 to 5,600, up from 5,200 and the current 5,431. They noted that strong earnings growth from five mega-cap tech stocks offset typical negative revisions to consensus EPS estimates.
This week’s main U.S. data includes May retail sales on Tuesday, expected to rise by 0.4 per cent after a 0.3 per cent decline in April. Markets will be closed on Wednesday for a holiday.
At least ten Federal Reserve policymakers will speak this week, likely addressing the market’s expectation of two rate cuts this year. Despite the Fed’s hawkish stance last week, soft inflation data has led futures to price in a 76 per cent chance of a rate cut by September and 50 basis points of easing for the year.
Central banks in Australia, Norway, and the UK are expected to maintain steady rates at their meetings this week. However, the Swiss National Bank (SNB) may ease rates due to the Swiss franc’s strength. Market speculation of a rate cut increased to 75 per cent as political uncertainty in France pushed the euro to a four-month low against the franc.
French markets suffered significant losses last week ahead of a potential snap election that could give the far-right a majority, posing risks to the country’s fiscal stability and the eurozone. European Central Bank policymakers have no plans to launch emergency purchases of French bonds despite the widening yield spreads over German bunds.
The euro remained weak at USD1.0698 after dropping 0.9 per cent last week to a six-week low of USD1.06678. The dollar firmed slightly against the yen at 157.52, after briefly surpassing 158.00 on Friday when the BOJ delayed its bond-buying taper.
In commodities, gold held steady at USD2,325 an ounce after a 1.7 per cent rise last week. Oil prices dipped slightly after a 4 per cent rally last week, with Brent down USD0.17 to USD82.45 a barrel and US crude down USD0.18 to USD78.27 a barrel.
