(Image: iStock)Hong Kong shares fell more than 1%, underperforming the region, with shares in mainland China shares also slipping. A private survey of China’s services sector showed activity expanded at the slowest rate this year in August, a signal that economic recovery is losing traction.
Property stocks were among the worst performers and developer Country Garden Holdings Co.’s woes added to the negative sentiment as it entered the final hours of a grace period to pay interest on dollar bonds. The company is also reported to plan payment extensions of seven yuan bonds.
There’s “some profit taking as PMI data was somewhat disappointing and Country Garden’s US dollar bond grace period deadline is looming”, said Marvin Chen, an analyst with Bloomberg Intelligence.
Stocks traded lower in South Korea, where inflation accelerated much faster than estimates in August on the back of higher energy costs, reinforcing the case for the central bank to keep the door open to further policy tightening to rein in prices.
Equities also declined in Japan and Australia, where the Reserve Bank of Australia is set to keep rates unchanged for the third straight month in a meeting later Tuesday. The regional stocks move drove the MSCI Asia Pacific Index toward its first decline in seven days.
The dollar edged up, while Treasuries were slightly lower across tenors as cash trading resumed. Australian bonds also fell ahead of the central bank’s meeting, with yield on the three-year rising three basis points and that on the 10-year up four basis points.
The offshore yuan weakened following the PMI data.
Oil continued to trade near the highest level since mid-November after a surge driven by supply cuts from OPEC+ that have tightened the market. Crude has rallied by about a quarter since late June as a result of supply reductions, which have been led by Saudi Arabia and Russia.
Meanwhile, Goldman Sachs lowered its estimate of US recession probability. “Continued positive inflation and labor market news has led us to cut our estimated 12-month US recession probability further to 15%, down 5pp from our prior estimate,” Jan Hatzius, its chief economist, wrote in a note. “We are also substantially more optimistic than most other forecasters in terms of our baseline GDP growth forecast, which averages 2% through the end of 2024.” DM
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