Shares in China and Hong Kong declined, while Japan pushed higher, putting the Nikkei 225 on track to erase its 2022 loss. S&P 500 and Nasdaq 100 futures dipped, suggesting a pause in the global stock bounce from bear-market lows. 

China’s central bank unexpectedly cut a key policy interest rate for the first time since January. It also withdrew liquidity from the banking system. Chinese bond yields and the offshore yuan fell.

Data showed slower than expected industrial output and retail sales in the world’s second-largest economy as well as shrinking property investment.

Elsewhere, Treasury yields drifted higher and the yield curve remained deeply inverted, pointing to worries that the Federal Reserve will tip the US into an economic contraction in the campaign against inflation. The dollar advanced.

Equity markets in recent weeks have drawn succour from signs of slowing inflation, which stirred hopes of a shift by the Fed to less aggressive monetary tightening that can contain price pressures without triggering a recession. But China’s faltering recovery shows many hurdles still lie ahead for risk appetite.

A key question now is how much longer a 12% rebound in global stocks from June lows can last. The bounce reduced this year’s losses to about 13%.

“We’re definitely heading in a better direction,” Kristina Hooper, Invesco chief global market strategist, said on Bloomberg Television. “It looks like we are past the peak for inflation. The problem is inflation is still very, very high.” 

Federal Reserve Bank of Richmond president Thomas Barkin said on Friday the central bank needs to keep raising interest rates until it’s clear inflation is running at its 2% target even if the economy weakens.

Investors are also keeping a wary eye on US-China tension. A US congressional delegation landed in Taiwan on Sunday for a two-day visit. House Speaker Nancy Pelosi’s stopover on the island, which China regards as part of its territory, led Beijing to conduct some of its most provocative military drills. 

Meanwhile, five of China’s largest state-owned companies on Friday announced plans to delist from US exchanges. The two countries are in a dispute about allowing American regulators to inspect audits of Chinese businesses.

Elsewhere, oil extended losses, gold retreated below $1,800 an ounce and Bitcoin hovered near $25,000.

Here are some key events to watch this week:

• Earnings include Walmart, Target, Home Depot, Tencent
• China data including retail sales, industrial production, Monday
• Hedge funds’ 13F filings, Monday
• Federal Reserve July minutes, Wednesday
• New Zealand rate decision, Wednesday
• UK CPI, US retail sales, Wednesday
• Australia unemployment, Thursday
• US existing home sales, initial jobless claims, Conference Board leading index, Thursday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.3% as of 11:22 a.m. in Tokyo. The S&P 500 rose 1.7% Friday
• Nasdaq 100 futures fell 0.3%. The Nasdaq 100 rose 2.1% Friday
• Japan’s Topix index added 0.5%
• Hong Kong’s Hang Seng index lost 0.6%
• China’s Shanghai Composite index was down 0.1%
• Australia’s S&P/ASX 200 index rose 0.4%
• Euro Stoxx 50 futures added 0.3%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%
• The euro was at $1.0247, down 0.1%
• The Japanese yen was at 133.29 per dollar, up 0.1%
• The offshore yuan was at 6.7667 per dollar, down 0.4%

Bonds

• The yield on 10-year Treasuries rose one basis point to 2.84%
• Australia’s 10-year yield fell four basis points to 3.38%

Commodities

• West Texas Intermediate crude was at $91.41 a barrel, down 0.7%
• Gold was at $1,796.09 an ounce, down 0.5%. BM