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Asian stocks drift lower ahead of inflation, earnings signals

Published 08/06/2023, 11:33 PM
© Reuters.

Investing.com -- Most Asian stocks moved in a flat-to-low range on Monday tracking mixed signals from U.S. payrolls data released last week, with focus now turning to a slew of major earnings reports, as well as inflation signals from the world’s largest economies.

Regional markets have been on a downturn over the past week, as a downgrade in the U.S. sovereign rating, rising Treasury yields, and weak Chinese economic data dented appetite for risk-driven markets.

Chinese stocks were the worst performers on Monday, with the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes down 0.7% and 0.5%, respectively. Losses in Chinese stocks also pulled Hong Kong’s Hang Seng index 0.2% lower, as investors awaited more concrete stimulus measures from the government.

Investors also locked-in profits after strong gains over the past two months, particularly in Indian and Japanese stocks.

Japan’s Nikkei 225 index was largely flat on Monday, while futures for India’s Nifty 50 index pointed to a slightly positive open. Both indexes fell sharply last week, after racing to multi-year highs in June and July.

Australia’s ASX 200 fell 0.4%, while South Korea’s KOSPI shed 0.1%. Data on Friday showed that U.S. payrolls fell more than expected in July. But a surprise dip in unemployment and strong wage growth indicated that the labor market remained tight, which could attract more rate hikes from the Federal Reserve.

Major Asia earnings on tap this week

Focus this week is squarely on earnings reports from some of the largest firms in Asia.

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Chinese e-commerce giant Alibaba Group Holding Ltd (HK:9988) (NYSE:BABA) is set to report its June quarter earnings this Thursday, potentially offering more cues on Chinese consumers.

Alibaba is also expected to outline more details on its plan to split into six separate companies.

Japanese tech giants Sony Corp (TYO:6758) (NYSE:SONY) and SoftBank Group Corp (TYO:9984) are also set to report quarterly earnings this week, while Commonwealth Bank Of Australia (ASX:CBA), Australia’s biggest bank, will report its earnings for the year to June 30 on Wednesday.

Focus will largely be on how Asia’s biggest firms navigated rising global interest rates, and whether worsening economic conditions were now being reflected in corporate earnings.

Inflation, Chinese trade data also due this week

Markets were also awaiting key inflation readings from the U.S. and China this week, with the latter expected to slip closer towards disinflation amid a slowing post-COVID economic recovery.

Chinese trade data is on tap this week, and is expected to offer more insight into Asia’s largest economy as it struggles with weakening local and overseas demand for goods.

Broader markets are squarely focused on key U.S. consumer price index inflation data this week, which is expected to factor into monetary policy and potentially affect future interest rates.

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