(Bloomberg) — Asian stocks swung to a loss and US equity futures fell as slowing Chinese industrial profit growth sapped optimism after last week’s equity rally. The yen strengthened against all its Group-of-10 peers.
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China shares led declines as data showed profits at the nation’s industrial companies climbed at a slower pace, suggesting the economic recovery remains uncertain. The Hang Seng China Enterprises Index dropped as much as 1.4% while CSI 300 Index closed 1.2% lower in Monday’s morning session. Benchmarks also fell in Australia and Japan.
Equities trimmed some of last week’s gains amid uncertainty before the next installment of key global economic data this week including euro-zone inflation data, China PMIs and US personal consumption numbers on Thursday, and US, European and Chinese PMIs on Friday. Asian markets had little direction from the US following the holiday shortened post-Thanksgiving session Friday.
“We’ve seen US bond yields gap higher at the open, and that has weighed on equity market sentiment to send US futures down alongside Chinese markets that are already under pressure from weak industrial profits,” said Matt Simpson, a senior market strategist at City Index Inc.
US stock futures dropped in Asia after the S&P 500 capped a fourth week of gains Friday, when the VIX — Wall Street’s “fear gauge” and a measure of equity volatility — fell to its lowest level since January 2020.
The subdued growth at Chinese industrial companies will likely keep firms cautious about expanding or hiring more, which in turn could add more pressure on prices. Profits increased just 2.7% in October from a year ago, down from September’s 11.9% gain.
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“The profit numbers show that current recovery momentum is still fairly fragile,” Dong Chen, head of Asia macroeconomic research at Pictet Wealth Management, said in an interview with Bloomberg Television. “We still have a long way to go to get out of the woods.”
This week, investors will be looking especially closely at Chinese activity data to…
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