Asia Pacific stocks were mixed on Monday morning, as investors reviewed the latest economic data from China and the results of an election in Japan.
China's Shanghai Composite was down 0.29% by 10:02 PM ET (02:02 AM GMT) and the Shenzhen Component was down 0.71%. Caixin's manufacturing PMI for October was 50.6, slightly above the 50 in the forecast given by Investing.com.
The manufacturing and non-manufacturing PMIs, released the previous day, were at 49.2 and 52.4 respectively.
China's property sector is also in the spotlight, with at least four developers defaulting on their bonds in October alone. China Evergrande Group (HK:3333) avoided default twice by last-minute bond interest payments.
Hong Kong's Hang Seng Index fell 1.27%.
Japan's Nikkei 225 gained 2.39% and South Korea's KOSPI gained 0.45%.
In Australia, the ASX 200 was up 0.52%.
In Japan, shares rose more than 1% after Prime Minister Fumio Kishida's Liberal Democratic Party secured a majority in Sunday's election. This unexpected outcome not only averted the worst-case scenario, but also paved the way for fiscal stimulus measures.
A range of central banks will make their policy decisions throughout the week, starting with the Reserve Bank of Australia (RBA) on Tuesday, the Federal Reserve on Wednesday and the Bank of England on Thursday.
Australian government bonds recovered from Friday's crash when the RBA decided not to defend its yield target. Short-term bond yields in places like Australia and Canada rose as the market expected more rate hikes due to inflationary pressures. In the United States, yields on longer-dated Treasuries also rose.
Still, the volatility of the fixed-income markets suggests that investors expect the post-COVID-19 economic recovery to slow as persistent inflation prompts central banks to start asset reduction. Still, global equities are still near record highs.
“There has been a bullish bias in equities, which may require a more cautious move this week,” said Chris Weston, head of research at Pepperstone Financial Pty.
“Despite the fact that stocks have stabilized considering the possibility of a rapid rate hike, this is definitely a positive.”
Meanwhile, earnings season also continues. Companies include Airbnb Inc. (NASDAQ: ABNB), Moderna Inc. (NASDAQ:MRNA), Pfizer Inc. (NYSE: PFE), SoftBank Corp. (T: 9434) Toyota Motor (NYSE: TM) Corp. (T: 7203) and Uber Technologies Inc. (NYSE: UBER) will publish their results during the week.
Dollar strengthens, Euro also rises after ECB meeting
The dollar spiked in the early European session on Friday, recovering after falling to a one-month low against the euro following the European Central Bank meeting on Thursday.
At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% higher at 93.438, just above Thursday's low. was 93.277 - a level not seen since September 27.
USD/JPY traded lower at 113.53, GBP/USD almost flat at 1.3788 and AUD/USD flat at 0.7544, after hitting its highest level since early July. at 0.7555 in the previous session.
EUR/USD fell 0.1% to 1.1665 after rallying to a high of 1.1692 overnight, the first time since September 28.
This follows Thursday's ECB meeting, which resulted in the central bank leaving interest rates and asset purchases unchanged, as expected. However, the focus is on Christine Lagarde, with the ECB President suggesting that inflation will be even higher in the long run, leading traders to bet on the central bank tightening monetary policy soon.
China: Economic growth slows but retail sales soarPersonal income tax revenue from salaries, wages, securities, real estate… decreasedMarket pulse October 27: Green on a large scale
“The ECB still considers the period of higher inflation to be temporary but has been much more balanced, paving the way for further reductions in asset purchases in December,” said ING analyst Carsten Brzeski.
Traders will keep an eye on economic data from both regions later in the day, with preliminary data on the consumer price index for Europe, while the US has data on spending and income in individual.
Going forward, the Federal Reserve and the Bank of England are expected to deliver their policy decisions next week. The Fed is expected to start easing asset purchases as of this meeting, while the BOE is expected to announce a rate hike.