Asian Stock Market: Bears return to the desks amid US-China jitters, recession woes

• Asian equities retreat as fears surrounding Sino-American tussles, China’s growth join broad economic slowdown woes.
• US Treasury yields refreshed four-month low to amplify risk-aversion wave.
• Oil prices fail to cheer softer USD, gold prints five-day uptrend near one-month high.

Asia-Pacific shares remain pressured during early Tuesday, reversing the latest gains, as fears emanating from China join recession woes ahead of the key US employment data for July. While portraying the mood, MSCI’s index of Asia-Pacific shares outside Japan drops 1.62% intraday while Japan’s Nikkei 225 declines 1.57% daily heading into Tuesday’s European session.

US House Secretary Nancy Pelosi’s visit to Taiwan and the likely hardships for Chinese chipmakers due to the American consideration of limiting shipments of American chipmaking equipment appear main challenges to the market sentiment. On the same line could be the news from a Chinese media report suggesting the dragon nation’s readiness for a military drill in Bohai, South China Sea.

Furthermore, Bloomberg’s piece signaling no hard boundaries for Beijing’s Gross Domestic Product (GDP) also appears to weigh on the market’s risk appetite. The news quotes people familiar with the matter as said, “China's top leaders told government officials last week that this year's economic growth target of "around 5.5%" should serve as guidance rather than a hard target that must be hit.”

Elsewhere, disappointing US PMIs joined the last week’s US Gross Domestic Product (GDP) and Fed Chair Jerome Powell’s cautious comments to portray recession woes. On Monday, the US ISM Manufacturing PMI dropped to the lowest since 2020 in July as the activity gauge dropped to 52.8 versus 53.0 prior.

That said, Chinese equity benchmarks are down between 2.0% and 3.0% whereas shares in Australia drop 0.40%. However, New Zealand’s NZX 50 remains indecisive ahead of Wednesday’s NZ jobs report. Further, South Korea’s KOSPI and Indonesia’s IDX Composite also decline nearly 1.0% daily at the latest but India’s BSE Sensex stays mildly offered as traders await Thursday’s Reserve Bank of India (RBI) interest rate decision.

On a broader front, the US Dollar Index (DXY) refreshed the monthly low before bouncing off 105.00. The greenback’s weakness could be attributed to the downbeat US Treasury yields as the benchmark 10-year US bond coupon declines 6.9 basis points (bps) to 2.54% at the latest. Further, Wall Street closed with mild losses while the S&P 500 Futures extend the previous day’s pullback from a two-month high.

Additionally, WTI crude oil remains pressured around monthly low while gold price prints five high as bulls attach $1,780 hurdle.

To sum up, China contributes to the recent risk-off mood but major attention will be given to speeches from Chicago Fed President Charles L. Evans and President of the Federal Reserve Bank of St. Louis James Bullard for fresh impulse.