Asia stocks struggle even in China’s large rate cut

SINGAPORE — Asian shares were pinned below 1-1/2-month highs on Tuesday as even a larger-than-expected interest rate cut in China failed to excite investors jaded at the lack of bigger stimulus measures.

China’s five-year loan prime rate was lowered by 25 basis points (bps) to 3.9%, bigger than the five- to 15-bp cuts forecast by economists. The Shanghai Composite, however, fell 0.7% in early trade and blue chips fell 0.6%.

The yuan was steady at 7.1972 per dollar. Elsewhere Japan’s Nikkei opened flat to stay below but close to topping its 1989 record high.

MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.1%, pulling away from its highest level since January touched during Monday. South Korean shares fell 1%.

US Treasury yields ticked up, as trade resumed following Monday’s US holiday. S&P 500 futures were 0.2% lower.

Outside China global markets are smarting a little as traders have sharply scaled back bets on US rate cuts following high readings on producer and consumer prices.

Economic indicators, on which this week is a little bit light, are likely to drive the next move.

Ten-year US Treasury yields rose 1.4 bps to 4.31%. Two-year yields were steady at 4.65%.

Tuesday moves in currency markets were fairly modest, with the dollar firm and pushing above 150 Japanese yen.

The New Zealand dollar paused a recent climb to steady at $0.6138 as traders weigh the risk of a surprise interest rate hike next week.

The Australian dollar edged 0.2% lower at $0.6529 though meeting minutes showed the central bank is not sure it’s finished with rate hikes yet.

Deals and earnings drove stock prices under the surface.

Capital One, a US consumer lender, said it will acquire credit card issuer Discover Financial Services in an all-stock transaction valued at $35.3 billion, though prices didn’t immediately react with markets closed.

In Australia, ANZ Bank shares fell 3.5% and Suncorp shares rose nearly 6% after ANZ’s buyout of Suncorp’s banking business was cleared by the competition tribunal.

Casino operator Star Entertainment shares fell more than 20% to a record low after a second regulatory investigation into the company’s Sydney casino was announced.

BHP, the world’s biggest listed miner, logged flat half-year profits and shares slipped 0.2%.

Ahead there will be a wary eye on Nvidia’s earnings report on Wednesday as investors discover whether it can beat already lofty expectations.