By Selena Li
HONG KONG Asian stocks fell on Tuesday as this week's soft Chinese economic data and an absence of stimulus weighed on sentiment, while investors were waiting to see if U.S. retail sales figures shed light on the Federal Reserve policy outlook.
Investor focus now swings to the next round of quarterly results this week, with big banks such as Bank of America, Morgan Stanley and Goldman Sachs posting earnings.
Tesla also reports later this week, which will allow the market to take a closer look into how large U.S. corporations are faring, following recent equities rally.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.56% on Tuesday.
Investors are waiting for clearer signs that inflation is cooling, with the readings on U.S. retail sales and industrial production to be released later on Tuesday.
Economists reckon retail sales in June will show a 0.5% rise from May, strong enough to keep the soft landing scenario without rekindling worries about inflation.
"People think of the tug of war between growth and inflation still. This week we have a number of US economic data that will give a clear indication on whether further rate hikes are needed," said Gary Ng, senior economist at Natixis Corporate and Investment Bank.
The Fed, European Central Bank and Bank of Japan are holding policy reviews next week.
After the cancellation of trading on Monday due to a typhoon, Hong Kong stocks were catching up with the fall in Chinese markets triggered by data showing the post-pandemic bounce in China's economy was over.
Ng said Asian investors were struggling to find something positive after the "very poor Chinese economic data".
The benchmark Hang Seng index dropped 1.93% while the technology sector fell 2.09%.
China A shares were down 0.23% on Tuesday. Japan's Nikkei, however, eked out a gain of 0.09%.
E-mini futures for the S&P 500 traded almost flat, edging down 0.03%.
A possible divergence of Fed and ECB on rate hikes has recently caused the dollar to weaken.
Money markets have largely priced in a 25-basis-point rate hike from the Fed at its policy meeting later this month, though there are expectations that rates will come down as early as December.
Conversely, investors expect the ECB and the Bank of England to extend their rate-hike cycle.
The U.S. dollar index dipped slightly to 99.71 in Asia trade, having struck its lowest since April 2022 on Friday.
The euro hit a fresh 17-month high of $1.1259, firming 0.23% and heading for the ninth session of gains.
The Bank of Japan (BOJ) holds its monetary policy meeting next week, with investors on the lookout for whether it will start phasing out its ultra-dovish policy.
Benchmark 10-year notes were flat, with a yield of 3.7989%.
U.S. crude rose 0.32% to $74.39 per barrel and Brent was at $78.72, up 0.28%.
Spot gold added 0.29% to $1,960.29 an ounce.
(Reporting by Selena Li; Editing by Simon Cameron-Moore and Sam Holmes)
