Asian shares mixed after China cuts key rate, Japan GDP up

The People’s Bank of China cut its rate on a one-year loan to 2.75% from 2.85% and injected an extra 400 billion yuan ($60 billion) in lending markets after government data showed July factory output and retail sales weakened.

Beijing is aiming to shore up sagging economic growth at a politically sensitive time when President Xi Jinping is believed to be trying to extend his hold on power.

The ruling Communist Party effectively acknowledged last month it can’t hit this year’s official 5.5% growth target after anti-virus curbs disrupted trade, manufacturing and consumer spending. A crackdown on corporate debt has caused activity in the vast real estate industry to plunge.

Meanwhile, Japan reported its economy expanded at a 2.2% rate in April-June from a year earlier, as consumer spending rebounded with the lifting of COVID-19 restrictions.

Tokyo’s Nikkei 225 index
NIK,
+1.14%
added 1% to 28,830.90 and the S&P/ASX 200
XJO,
+0.45%
in Sydney climbed 0.5% to 7,070. The Shanghai Composite index
SHCOMP,
-0.02%
was flat at 3,276, while Hong Kong’s Hang Seng index
HSI,
-0.67%
gave up 0.1% to 20,135.81.

South Korean markets were closed for a holiday.

Bangkok’s SET index
SET,
+0.18%
edged 0.1% lower. The Thai government reported the economy expanded at a 0.7% quarterly pace in April-June, slowing from 1.1% growth in the first quarter of the year.

Tourism has rebounded after two years of tight controls to fight COVID-19, but only to about a quarter of the pre-pandemic level.

“The outlook for the rest of the year will depend in large part on how quickly tourism recovers,” Gareth Leather of Capital Economics said in a commentary.

On Friday, Wall Street capped a choppy week of trading with a broad rally, as the S&P 500 notched its fourth consecutive weekly gain.

The benchmark index closed 1.7% higher, at 4,280.15, for a 3.3% weekly gain. The S&P 500
SPX,
+0.40%
hadn’t posted such a good stretch since November.

The Dow Jones Industrial Average
DJIA,
+0.45%
rose 1.3% to 33,761.05, while the Nasdaq gained 2.1% to 13,047.19. The Russell 2000 index
RUT,
+0.23%
of smaller companies added 2.1% to 2,016.62.

Major indexes got a big bump on Wednesday after a report showed that inflation cooled more than expected last month. Another report on Thursday showed inflation at the wholesale level also slowed more than expected.

They raised hopes among investors that inflation may be close to a peak and that the Federal Reserve could ease off on interest rate hikes, its main tool for fighting inflation.

The aggressive pace of rate hikes has investors worried that the Fed could steer the economy into a recession.

The yield on the 10-year Treasury
TMUBMUSD10Y,
2.786%
fell to 2.83% from 2.88% late Thursday. It remains below the two-year yield. That’s an unusual inversion of the expectation that borrowing money for a longer period should cost more than a shorter period.

When investors demand a higher return for a short term like the 2-year than a longer one like 10 years, it’s viewed by some investors as a reliable signal of a pending recession. The economy has already contracted for two consecutive quarters.

This week, the Commerce Department releases its retail sales report for July and retail giant Walmart reports its latest financial results.

Investors can also assess the health of the housing market when they get a report on home sales for July and the latest earnings from Home Depot.

In other trading Monday, U.S. benchmark crude oil
CL.1,
-1.13%
shed $1 to $91.07 per barrel in electronic trading on the New York Mercantile Exchange. It lost $2.25 per barrel on Friday.

Brent crude oil
BRN00,
-1.71%,
the basis for pricing for international trading, gave up $1.12 to $97.03 per barrel.

The U.S. dollar slipped to 133.20 Japanese yen
USDJPY,
-0.14%
from 133.43 yen. The euro
EURUSD,
+0.07%
weakened to $1.0245 from $1.0261.