HONG KONG: A one-day rally in Chinese stocks fizzled out as the yuan resumed declines and data showed further signs of weakness in the economy.
The Shanghai Composite Index dropped 0.6% at 10:09 a.m. The gauge ended last month, its worst since January 2016, with a 2.2% gain on Friday. The yuan retreated 0.2% to 6.6398 per dollar, after weakening by a record in June. Hong Kong markets are closed for a holiday.
ING added to the bearish start by predicting the Chinese currency will fall to a 10-year low of 7 by the end of the year, the most pessimistic forecast by analysts tracked by Bloomberg.
Shanghai stocks tumbled into a bear market last week amid concern the economy will struggle to withstand rising tensions with the U.S. Purchasing manager index readings for June released on Saturday showed a gauge of export orders shrinking, suggesting the trade war is already weighing on growth.
Bonds also started July on a weaker note, with the yield on 10-year government debt rising 2 basis points to 3.5%, after ending Friday at its lowest level since April 2017.