Asian stocks falter after Chinese data disappoints

Asian shares fell on Friday after lacklustre Chinese economic data and worries about a delay in US fiscal stimulus discouraged some investors from taking on risk.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.24 per cent, although shares in Japan rose 0.07 per cent.

South Korean stocks fell 1.27 per cent after authorities reported the largest number of new coronavirus cases since March.

Chinese shares erased early gains and fell 0.1 per cent as a slower-than-expected rise in industrial production and a surprise fall in retail sales weighed on investor sentiment.

E-mini futures for the S&P 500 rose 0.23 per cent.

Yields on US Treasuries remained elevated after an auction of 30-year bonds on Thursday was met with weak demand.

Further equity gains are likely to be limited as investors await progress in negotiations over US economic stimulus, which is necessary to prevent a nascent recovery in the world's largest economy from sliding into reverse.

The S&P 500 ended slightly lower on Thursday after briefly trading above its record closing high level for a second day as doubts about US stimulus measures took hold.

“Many say that the best treatment for altitude sickness is to stop and rest where you are,” Rodrigo Catril, Senior FX Strategist at National Australia Bank in Sydney, wrote in a note about the slight pullback in US stocks and government bonds.

A note of caution

The mood was cautious in Asia after Chinese retail sales unexpectedly fell in July, suggesting domestic demand is still struggling after the coronavirus outbreak.

Some traders stuck to the sidelines before a meeting between US and Chinese officials about their Phase 1 trade deal on Saturday.

Spot gold held steady at $1,952.41, close to a record high set last week in another sign of cautious sentiment.

Data on Thursday showed the number of Americans seeking unemployment benefits dropped below one million for the first time since the start of the Covid-19 pandemic, but this was not enough to change economists' views that the jobs market is faltering.

Yields on 30-year US Treasuries stood at 1.4141 per cent in Asia on Friday, close to a five-week high after the government sold a record amount of 30-year bonds to weak demand on Thursday.

Benchmark 10-year Treasury yields traded at 0.7094 per cent in Asia, close to a seven-week high hit on Thursday.

Higher yields broadly supported the US dollar, which held steady at 106.94 yen and at $1.1811 against the euro .

Elsewhere, the Australian dollar edged lower to $0.7139 as the weak Chinese data suggests less demand for Australian commodity exports.

Oil futures bounced in Asia US crude rising 0.14 per cent to $42.30 per barrel. Brent edged 0.18 per cent higher to $45.04 a barrel, but further gains may be limited by worries about weak global energy demand.

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