Asian Stock Market: China probes bulls with downbeat covid, macro updates

• Asia-Pacific markets trade mixed as China’s data, coronavirus updates challenge optimism.
• Fedspeak, downbeat US data previously triggered recovery moves.
• Light calendar keeps traders stuck to risk catalysts for fresh impulse.
• PBOC’s inaction, South Korean signals for big monetary policy moves gained little attention.

Markets in the Asia-Pacific region remain divided as headlines from China, as well as an absence of major positives elsewhere, test bulls during Monday’s Asian session. While portraying the mood, MSCI’s index of Asia-Pacific shares outside Japan remains lackluster, up 0.10%, whereas Japan’s Nikkei 225 rises 0.50% by the press time.

That said, risk-off returns to the table, fading Friday’s recovery moves, after China reported downbeat figures for April month’s Retail Sales and Industrial Production, backed by conveying fresh fears over the coronavirus resurgence.

That said, Shanghai City Official’s comments and weekend updates from Beijing were the major catalysts to renewing COVID-19 fears. While Shanghai City Official initially mentioned that the city's epidemic is under control, he also stated, “However the risks of rebound remain and we need to continue to stick to controls,” which in turn drowned the market’s risk appetite. On the same line was the weekend news suggesting Beijing’s guidelines to work from home for four districts, including the heavyweight Chaoyang.

It’s worth noting that the People’s Bank of China (PBOC) kept the Medium-Term Lending Facility (MLF) rate for 1-year unchanged at around 2.85%.

Amid these plays, shares in China and Hong Kong remain on the back foot at the latest. The same weighs on the prices of Australia and New Zealand shares, not to forget equities from South Korea and Indonesia, due to trade links with Beijing.

It should be noted that the comments from the Bank of Korea, suggesting a big interest rate rise ahead, exerts additional downside pressure on South Korea’s KOSPI. “The South Korean central bank chief's comment that he could consider big-step interest rate raises in coming months shook the local bond market on Monday, as Asia's fourth-largest economy also braced for fast slowing in growth,” said Reuters.

On a broader front, the S&P 500 Futures drop 0.80% even after the Wall Street benchmarks rallied the previous day. Further, the US 10-year Treasury yields struggle to extend Friday’s recovery moves as the bond coupon declines 2.5 basis points (bps) to around 2.90% by the press time. This in turn renews the US dollar’s upside momentum and exert downside pressure on the prices of commodities, as well as equities of late.