Asia stock markets weakened on Monday as investors in China sold off shares in property developers, remaining unconvinced by authorities’ efforts to revive activity in the mainland real estate market.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was down 0.3%, after U.S. stocks ended the previous session with mild gains.
Australian shares (.AXJO) reversed earlier losses to be up 0.12% and Japan’s Nikkei stock index (.N225) slid 0.19%.
In Hong Kong, the Hang Seng Index (.HSI) was down 1.4%, as investors retreated from China’s troubled property sector.
The Hang Seng Property Index (.HSNP), a gauge of Hong Kong’s top developers, shed almost 4% while the mainland property index (.HSMPI) was off 3.24%.
“We need the property market to stabilize first in order for any meaningful kind of economic rebound to happen in China,” said David Chao, Invesco’s Asia Pacific market strategist.
“We are not calling for a property rebound but we want to see some stability.
“We are seeing investment down in the mid to high single digit level year on year, there is still softness in those tier 2 and 3 cities which is why we have seen a slew of measures in those areas. Those should put a floor under the property market some time soon.”
In recent weeks China’s authorities – including the housing ministry, central bank and financial regulator – have rolled out a series of measures, such as easing borrowing rules, to support the debt-riddled property sector, and there are some expectation for more steps to revive demand in major ciities like Beijing, Shanghai and Shenzhen.
Hong Kong stocks were also dampened as e-commerce giant Alibaba Group (9988.HK) dropped 3.1% on the surprise departure of outgoing CEO Daniel Zhang from its cloud unit.
China’s bluechip CSI300 Index (.CSI300) was up 0.37%.
In the United States, the Consumer Price Index (CPI) for August, due out on Wednesday, is expected to rise 0.6% month-on-month for August, which would take the year on year rate to 3.6%, according to a Wells Fargo research note.
Investors are pricing in a 93% probability that the Fed will keep rates at current levels after its next meeting ends on Sept. 20 but only a 53.5% change for another pause at the November meeting, according to CME group’s FedWatch Tool.
The yield on benchmark 10-year Treasury notes rose to 4.2939% compared with its U.S. close of 4.256% on Friday. The two-year yield , which rises with traders’ expectations of higher Fed fund rates, touched 5.0033% compared with a U.S. close of 4.984%.
In China, there was an easing of deflationary pressures with consumer price index (CPI) rising 0.1% in August from a year earlier. That was slower than the median estimate for a 0.2% increase in a Reuters poll but much stronger than a 0.3% decline in July.
China also had its smallest drop in factory prices in five months. The producer price index fell 3.0% from a year earlier, in line with expectations, after a drop of 4.4% in July.
Global energy markets are also keeping a close watch on Chevron Corp’s (CVX.N) negotiations with its workers after strikes began at key liquefied natural gas (LNG) facilities in Australia that supply 5% of the world’s output
European gas prices have been volatile since August when news of the potential labour unrest first broke.
Gas prices spiked as much as 14% after Friday’s news that strikes would start following five days of talks which resulted in no deal.
The dollar on Monday dropped 0.85% against the yen to 146.56 . It remains some way off its high this year of 147.87 on reached earlier this month.
The European single currency was up 0.2% on the day at $1.0709, having lost 1.09% in a month, while the dollar index , which tracks the greenback against a basket of currencies of other major trading partners, was down 0.114% at 104.73.
China’s central bank yanked the yuan off a 16-year low against the dollar on Monday by setting a daily midpoint guidance rate with the strongest bias on record, signaling increasing discomfort with the currency’s recent weakness.
In the spot market, the onshore yuan was changing hands at 7.3245 per dollar at 0210 GMT, after hitting 7.3510 on Friday, which as 6.1% down from the start of the year and a level last seen during the global financial crisis.
U.S. crude dipped 0.57% to $87.01 a barrel. Brent crude fell to 0.21% to $90.46 per barrel.
Spot gold was trading slightly higher at $1,918.3663 per ounce.
