Stock futures were declining Monday after China surprised markets with a cut in interest rates after data showed a weakening of retail sales and factory output in the world’s second-largest economy.
Contracts linked to the
Dow Jones Industrial Average
fell 170 points, or 0.5%, to 33,548,
S&P 500
futures were down 0.5% and
Nasdaq
futures declined 0.4%.
Stocks in the U.S. closed broadly higher Friday and the S&P 500 rose for the fourth straight week after two reports on inflation — one at the consumer level, the other wholesale — showed inflation slowed more than expected last month.
The S&P 500 gained 3.3% for the week.
But U.S. markets were on the back foot Monday after the People’s Bank of China reduced its lending rate on a one-year loan to 2.75% from 2.85% following industrial output and retail sales data from July that missed economists’ estimates.
The rate cut is the second this year from Beijing as its stringent zero-Covid policy has forced businesses to shut, consumers to pull back on spending and growth to slow.
“The economic data from China overnight was very disappointing, to put it mildly,” said Craig Erlam, senior market analyst at Oanda. “Combined with the lending figures on Friday, it does not paint a good picture of domestic demand or the growth outlook.”
Asian markets finished mixed on Monday.
Esty Dwek, chief investment officer at Flowbank SA, told Bloomberg Television that investors were “focusing on the fact the U.S. seems to have finally started a period of disinflation.”
Dwek added that “if China is slowing and isn’t going to pick up very much then investors really need the U.S. to hold up.”
The strength of the U.S. consumer will be closely watched this week by Wall Street as major retailers
Walmart
(ticker: WMT),
Target
(TGT) and
Home Depot
(HD) report quarterly earnings, and U.S. retail sales data for July are released.
Stocks got a boost last week from data that suggested inflation in the U.S. may have peaked, leaving investors to believe that could allow the Federal Reserve to be less aggressive when boosting interest rates. In addition, a report on consumer sentiment, released last Friday, rose in early August from record lows touched in June.
The Fed on Wednesday will publish the minutes from its policy meeting in July, at which the central bank raised rates by 0.75 a percentage point for the second straight month.
Here are some stocks on the move Monday:
American depositary receipts of
Li Auto
(LI) fell 6.2% after the Chinese electric-vehicle maker’s third-quarter deliveries estimate missed forecasts. Fellow Chinese EV makers
NIO
(
NIO
) and
XPeng
(XPEV) also tumbled.
Write to Joe Woelfel at joseph.woelfel@barrons.com
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