- Chinese Stocks Drop With Aussie on Moody’s Cut
China’s stocks declined and the Aussie dollar slumped after Moody’s Investors Service cut its rating on the country’s debt. Iron ore led a slump in industrial commodities, while oil rose.
The Shanghai Composite Index dropped for a third day as Moody’s reduced its rating on China amid concerns over rising debt and slowing economic growth. Nickel led base metals lower. Outside Chinese and Hong Kong markets, most Asian stocks were higher. The euro was steady in the wake of the suicide bombing in Manchester, even as Prime Minister Theresa May warned that further attacks could be imminent. Oil extended a five-day surge.
Moody’s take on China follows evidence this week of stronger global growth as reports showed the German economy is firing on all cylinders and France’s is gathering momentum. Attention is also on the U.S., with the Federal Reserve due to release minutes from its most recent meeting, offering more clues on the pace of interest-rate increases.
“Moody’s rating’s cut on China is weighing on people’s minds with the Shanghai Composite Index continuing its slide, a stark contrast to other equity markets that are trading around fresh highs,” Norihiro Fujito, a Tokyo-based senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co. “Apart from China, investors will be on the lookout for any potential negative developments on Trump-Russia investigations.”
Stock markets in the U.S. have recovered most of the value erased when the S&P 500 Index slumped on May 17 amid concern surrounding the prospects for President Donald Trump’s reform policies. Still, doubts about the pace of inflation have pushed Treasuries higher ahead of next month’s Fed decision.
Fed Bank of Philadelphia President Patrick Harker said June “is a distinct possibility” for the U.S. central bank’s second interest-rate increase of 2017. He told reporters that another downside surprise on inflation would “worry me a little bit.”