By Swati Pandey
SYDNEY (Reuters) – Asian stocks started the week on a softer note on Monday after posting their first weekly decline since early June, while the dollar was on the defensive against China's key economic data.
The trade was expected to be light, since Japan was closed for a public holiday.
MSCI's broader index of Asia and the Pacific shares outside Japan was slightly lower, with 524.9 points. It fell a little over 1% last week, which generated five consecutive weeks of gains.
Australian shares fell 0.8%, while those of South Korea fell 0.3%.
The markets will focus on China's Gross Domestic Product data at 0200 GMT, where analysts expect second-quarter growth to have fallen to 6.2% from the previous year, the weakest annual pace since early 1992.
A disappointing number would add to concerns about the slowdown in global growth and reinforce the case for further encouragement from the Chinese authorities, as a damaging trade war with the United States continues.
Along with GDP, China will also publish June activity data, including retail sales, industrial production and urban investment, which could give more clues as to whether previous support measures are starting to work, or if needed more flexibility of policies.
"It is unlikely that the gloom that looms over China's economy will soon disappear due to challenges on both the domestic and foreign fronts," ANZ analysts said.
"To stabilize growth, the People's Bank of China (PBoC) will maintain an accommodative bias during the rest of the year, in our opinion."
Later in the week, US retail sales UU And industrial production data will provide more clues about the health of the world's largest economy. The Federal Reserve of EE. UU It will launch your & # 39; Beige Book & # 39; On Wednesday, investors will seek comments on how commercial tensions were affecting business prospects.
In the currency markets, the dollar remained flat at 97,818 against a basket of major currencies.
They were reduced for three days in a row, since the markets have a total price on the possibility of a cut of 25 basis points (bps) to US interest rates. UU There is also a small chance of a 50 bps cut.
Against the Japanese yen, the dollar languished near its lowest level since early June, at 107.81, while the single currency remained virtually unchanged at $ 1.1271 after three successive sessions of gains.
Expectations that the Fed will maintain support rates have caused the bonds to join with US Treasury bonds. UU Ten years below the current Federal Reserve's rate range of 2.25% to 2.50%.
"The rhetoric of the Polish Fed has yielded a rate cut in July, in the eyes of the market, as a fait accompli: it is not whether they cut back, but how much," Morgan Stanley (NYSE 🙂 Strategist Hans Redekar told customers in a note.
Redekar said the bank was re-entering its short position in dollars and in long yen.
"If markets are disappointed, the yield curve is likely to flatten, the USD will strengthen and financial conditions will harden, these forces would exacerbate the already considerable obstacles facing the global economy," he added.
"Global reflation requires a weaker USD to boost world trade and commodity prices."
Concerns about global growth and low inflation have caused investors to be accumulating money in bonds and money market funds, Jefferies said, citing his global asset fund flow tracker.
"The danger is that with a mountain of cash parked in the money market funds, any commercial ceasefire would cause a large change in the safe assets," said Sean Darby, global capital strategist at Jefferies.
"At present, investors do not seem to be in any particular hurry to buy shares, earnings revisions have not yet come to an end, while economic surprises have been rare," he added.
"The conclusion is that we would emit a pause in the rise in risks."
In commodities, they fell 6 cents to $ 60.15 a barrel. It dropped 7 cents to $ 66.65.
Gold was a little higher at 1,416.14 an ounce, not far from a recent six-year high of $ 1,438.60.