As the economic outlook remains bleak in China, market specialists in the region observed a global stock gain with a pinch of salt and instead turned their interest to bonds.
European markets may follow suit with the exchanges there expected to open relatively flat.
A knock on effect of fluctuations in the Chinese economy is the negative blowback on certain nations in the region dependent on the world’s second biggest economy such as Hong Kong, Taiwan and Korea, who all saw their shares decline.
A recovery in China’s growth was a possibility after first-quarter data was released in March and the country’s economy was thought to be heading in a positive direction. However, doubts have been growing since April regarding the durability of a turnaround after contradictory data and soaring debt in a number of sectors.
A news article by an un-named ‘economic oracle’ in a communist publication last week that hinted to China’s L-shaped economic trend didn’t alleviate investors’ fears over future recovery potential either.
The lone positive market was the Nikkei, which gained 4 per cent as the yen continued to move away from the highs seen last year against the greenback.
“The overall mood in Asia remains cautious I would say” Jonathon Price, Director of Mergers & Acquisitions at Nikko Holdings commented. “The lack of recovery in the Chinese markets is a down point but I think market sentiment is leaning towards a reversal in overly bearish positions” he added.
Meanwhile, bonds held firm which may be a sign that investors remained pessimistic regarding the future of less solid assets in the short term as the current environment of slow economic development continues.
In currencies, the yen remained defensive after a period of decline following authority’s comments threatening to intervene should it continue the present trend.
The greenback received good comments by the Fed President William Dudley last week, which rekindled hopes of an interest rate hike after a disappointing U.S. payrolls report. He said that there was a reasonable possibility there would be two hikes this year.
The dollar outperformed its 6 basket rivals as it gained to a weekly high of 94.156.
In the energy sector, oil prices added following wildfires in Canada and a terrorist attack on an oil platform in Nigeria. Brent and U.S. crude figures were both out approximately 0.4 per cent coming in at $45.29 and $44.30 per barrel respectively.
