On Tuesday, Asian stocks retreated from their more than two-week highs, ahead of a crucial US inflation report, and as Chinese trade data showed a slowdown. MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.25% after Monday’s rally of 0.9%. The Hang Seng index in Hong Kong shed 0.85%, Australia’s benchmark, and South Korea’s Kospi lost approximately 0.2%. Meanwhile, China’s blue chips lost gains, with the benchmark CSI 300 falling 0.8% after data revealed an unexpected decline in imports and slower export growth.
Investors are focused on the US consumer inflation report scheduled for release on Wednesday after Federal Reserve Chair Jerome Powell hinted that rate-hiking decisions would be “driven by incoming data,” and signaled a possible pause in the rate-hiking cycle. Meanwhile, Friday’s strong payrolls report led investors to scale back expectations for the Fed’s first-rate cut’s timing and size.
Societe Generale’s Hong Kong-based head of Asian equity strategy, Frank Benzimra, says that “when it comes to the Chinese market, you have the question coming from investors now about the strength of the recovery.” He added that “so when you have some trend data, which is not as good as people expect, it raises doubts.”
The US S&P 500 E-mini futures indicated a 0.1% drop at the reopen following the equity benchmark ending little changed on Monday. The US 10-year Treasury yield dropped from a one-week high in Tokyo to sit slightly below 3.5%. Meanwhile, oil prices reduced slightly, with Brent crude down 30 cents to $76.71 and US West Texas Intermediate (WTI) crude dropping 26 cents to $72.90.