By Carla Mozee, MarketWatch
LOS ANGELES (MarketWatch) — Asian stocks pulled lower Monday, weighed by an unexpected drop in exports from China and the threat of default by the world’s largest economy later this week.
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Most regional benchmarks struggled in the wake of data out Saturday showing exports from China fell 0.3% in September from the year-earlier period, according to China’s General Administration of Customs, marking the weakest performance in three months. Private-sector economists had been looking for an increase of 5.5%, according to a Wall Street Journal survey.
Australia’s S&P/ASX 200 /zigman2/quotes/210598100/delayed AU:XJO -0.72% fell 0.4%. China is Australia’s largest trading partner which makes Australian assets particularly sensitive to Chinese data. Taiwan’s Taiex fell 0.9%, and Singapore’s Straits Times Index /zigman2/quotes/210597985/delayed SG:STI -1.02% shed 0.5%.
Meanwhile, reports cited no sign of progress toward reaching a deal that would end the partial U.S. government shutdown and steer the nation away from a potential default on its debt obligations.
Senate Republicans and Democrats met Sunday in a bid to broker a budget deal as the Republican-led House and President Barack Obama remained deadlocked. The Republicans want compromises on Obama’s health-care law, while Democrats have called for “clean” budget and debt-ceiling resolutions that have no cutbacks in funding for the health-care program. The administration puts the deadline for Congress to authorize the Treasury to pay its bills at Oct. 17.
But stocks in mainland China bucked the losing trend, with the Shanghai Composite
higher by 0.4% at 2,237.77. The market held to higher ground after Chinese government data showed consumer prices in September rose faster than anticipated, while wholesale prices extended their long string of declines.
South Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 -1.84% fell 0.2%.
Equity trading in Japan and Hong Kong was closed for holidays.
In Australia, shares of gold producer Newcrest Mining Ltd. /zigman2/quotes/203840223/delayed AU:NCM +2.08% /zigman2/quotes/206026738/composite NCMGF +7.79% dropped 3.8% after gold futures late last week fell below $1,300 an ounce as a possible breakthrough for the U.S. budget impasse hurt assets viewed as relatively safe.
Shares of Oz Minerals Ltd. /zigman2/quotes/208047353/delayed AU:OZL +0.40% /zigman2/quotes/201120691/composite OZMLF +0.65% fell 9.3% after the company lowered its full-year copper-production outlook earlier Monday.
“The ‘deal or no deal’ game being played in Washington, D.C., continues to wear down the markets,” and sentiment is “definitely bearish,” Invast Financial Services senior technical strategist Vito Henjoto wrote Sunday.
He said that with the U.S. dollar under more pressure the longer the shutdown continues, the Japanese yen /zigman2/quotes/210561789/realtime/sampled USDJPY -0.9007% is gaining more ground as a safe haven. The dollar bought 98.29 yen on Monday, less than ¥98.48 late Friday. The dollar had gained Friday after Washington lawmakers said they would keep talking throughout the weekend.
In Shanghai, investors considered a report that China plans to allow insurers to invest a larger share of their portfolios in stocks and real estate. The Friday report from the China Securities Journal said investment in equities may be allowed to rise to 30% from 25% of total assets, and to 30% from 20% for real estate and infrastructure.
China trade data
China’s trade report logged a decline in shipments to Europe and South Korea, and demand growth slowed sharply to Southeast Asia. Shipments to the U.S. rose 4.2% in September, but that was slower than the 6.1% increase in August.
Barclays analysts said the 0.3% decline in September exports was likely exaggerated by two technical factors: a high base from the “dubious” trade reporting that started last June, and the two fewer working days in September in Hong Kong, South Korea and Taiwan — which account for 20% of China’s exports — compared with a year ago. Barclays said that with adjustments for the two factors, it estimates exports rose roughly 3.5% year-over-year in September. Still, the “outlook for external demand in [the fourth quarter] is murky, given the uncertainties stemming from U.S. fiscal and monetary policies,” wrote Barclays chief China economist Jian Chang.
Imports to China, meanwhile, rose 7.4%, beating expectations for a 7% increase.
“The September trade report painted a mixed picture of soft external demand and resilient domestic demand,” said Société Générale economist Yao Wei in a note. “Together with the less upbeat PMI surveys, the chance of large upside surprises from other September activity data, including industrial production and fixed-asset investment, seems to be limited.” The other Chinese data she mentioned — as well as third-quarter gross domestic product — were due out Friday.