SYDNEY — Share markets were in a muddled mood on Monday as disappointing Chinese economic data fed doubts Wall Street’s rally could be sustained, while the dollar slid on the yen as speculators were forced out of suddenly unprofitable short positions.
China’s official measure of factory activity contracted in July as fresh virus flare-ups weighed on demand, and the Caixin PMI also missed forecasts.
South Korean activity weakened for the first time in two years, while Japan expanded at the slowest pace in 10 months.
That did not bode well for the raft of other PMIs due this week, including the influential U.S. ISM survey, while the July payrolls report on Friday should also show a further slowdown.
At the same time U.S. data out Friday showed stubbornly high inflation and wages growth, while central banks in the UK, Australia and India are all expected to hike again this week.
“We expect the Bank of England to step up monetary tightening with a 50bp hike at its August meeting. The increase in energy prices is likely to be the main driver,” warned analysts at Barclays.
“Central banks focus on the still strong inflation momentum and tight labor markets rather than signals of slowing growth. This could upset markets’ recent ‘bad news is good news’ view.”
The caution was evident as MSCI’s broadest index of Asia-Pacific shares outside Japan was nearly flat.
Chinese blue chips edged up 0.4%, while Japan’s Nikkei added 0.5% and South Korea held still.
S&P 500 futures and Nasdaq futures both eased 0.4%. EUROSTOXX 50 futures lost 0.3%, as did FTSE futures.
While U.S. corporate earnings have mostly beaten…
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