Chinese stocks lead Asia lower on stimulus worry: Markets close

(Bloomberg) — Shares in mainland China led losses in the region on Wednesday after weak economic data and as Beijing refused to commit to more economic stimulus.

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The benchmark CSI 300 fell as much as 5.1 percent in the opening minutes, but pared some of its losses. That erased much of yesterday’s gains, when stocks rallied on the return from the Golden Week holiday. Hong Kong shares fluctuated after Tuesday’s biggest drop in 16 years. U.S. stock futures fell after authorities mulled a Google breakup.

Concerns have grown that the latest burst of stimulus may be insufficient to convince investors of a sustainable recovery in the stock market. Chinese tourists paid less during the long holiday, while a news report citing Premier Li Qiang indicated that China needs to introduce policies to stabilize growth and expectations, a further sign that Beijing is trying to build confidence among investors.

The National Development and Reform Commission, China’s economic planning agency, announced that spending of 200 billion yuan ($28 billion) will be brought forward from next year, after analysts forecast a tax package worth up to 3 trillion yuan.

“I don’t know what the NDRC president was thinking with this,” said Alicia Garcia Herrero, chief Asia Pacific economist at Natixis SA. “Honestly, the longer they wait to clarify, the worse it can be because people will realize that there is no fiscal side to this stimulus — that it’s all monetary, it supports stocks and so on. And that’s pretty dangerous.”

The dollar and New Zealand bond yields fell after the nation’s central bank cut its benchmark rate by 50 basis points. It is the second consecutive rate cut by the Reserve Bank of New Zealand as policymakers become more concerned about the economic slowdown.

Meanwhile, India will reveal its rate decision later, while South Korea will join FTSE Russell’s benchmark bond index, capping months of official campaigning and an overhaul of financial market infrastructure.

Expectations regarding the rate cut in the US

In the US, the world’s biggest technology companies led stocks higher on Tuesday as the market bounced back from its worst session in a month. Chipmakers led gains on Tuesday as Nvidia Corp. extended a five-day rally to 14%.

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Treasuries were little changed after settling on Tuesday after a series of sell-offs over the past four sessions, boosted by last week’s US jobs data that dented rate cut expectations. With inflation data due later in the week, the US 10-year yield fell a basis point to just above 4%, while initial yields fell by a wider margin, as investors weighed comments from Federal Reserve officials.

Fed Bank of Boston President Susan Collins noted that rate cuts should be careful and data-driven. His counterpart in Atlanta, Raphael Bostic, said that while risks to inflation have receded, threats to the labor market have increased, although the economy is still strong. Governor Adriana Kugler said officials should focus on getting inflation on target with a “balanced approach” that avoids slowing jobs.

“The US data is not so strong that the Federal Reserve’s contribution to the global rate-cutting cycle appears to be over,” said Mark Haefele of UBS Global Wealth Management. “Therefore, we maintain our belief that investors are positioning themselves for lower rates.”

Key events this week:

• Power minutes, Wednesday

• The Fed’s Lorie Logan, Raphael Bostic, Austan Goolsbee and Mary Daly speak Wednesday

• US CPI, Initial Jobless Claims, Thursday

• The Fed’s John Williams and Thomas Barkin speak Thursday

• JPMorgan, Wells Fargo kick off earnings season for big Wall Street banks on Friday

• US PPI, University of Michigan, Consumer Sentiment, Friday

• The Fed’s Lorie Logan, Austan Goolsbee and Michelle Bowman speak on Friday

Some of the main movements in the markets:

Stocks

• S&P 500 futures were down 0.1% as of 11:21 a.m. Tokyo time

• Nikkei 225 futures ( OSE ) rose 0.6%

• The Japanese Topix has been changed a bit

• Australia’s S&P/ASX 200 rose 0.2%

• Hong Kong’s Hang Seng rose 0.4%

• Shanghai Composite down 3.6%

• Euro Stoxx 50 futures were little changed

Coins

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0973

• The Japanese yen was little changed at 148.16 per dollar

• The offshore yuan was little changed at 7.0669 per dollar

• The Australian dollar was little changed at $0.6741

Cryptocurrencies

• Bitcoin was little changed at $62,308.81

• Ether rose 0.5% to $2,455.4

BONDS

• The 10-year Treasury yield was little changed at 4.01%

• Japan’s 10-year yield rose one basis point to 0.930%

• Australia’s 10-year yield was little changed at 4.17%

commodities

• West Texas Intermediate crude was little changed

• Spot gold was down 0.1% at $2,618.93 an ounce

This story was produced with the help of Bloomberg Automation.

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