Asian stock markets experienced a lack of movement in early Monday trading, primarily influenced by investor uncertainty regarding how the stock exchanges in mainland China would react to recent economic stimulus plans announced over the weekend. Despite the Chinese government, represented by Finance Minister Lan Foan, pledging a significant increase in debt, key details about the overall scale of the stimulus remained vague, leaving investors anxious about the future trajectory of the market.
In recent weeks, Chinese stocks enjoyed a robust rally following the announcement of substantial economic support measures, but this momentum appears to be waning as traders seek clarity on the government’s intentions. “Investors were eagerly awaiting a more explicit fiscal stimulus announcement at Saturday’s Ministry of Finance briefing, and the lack of concrete details may lead to disappointment in the market this week,” suggested Ray Attrill, head of FX strategy at National Australia Bank. The uncertainty surrounding fiscal loosening and its potential impacts on consumer support will likely keep market participants on edge.
The MSCI index, which tracks a wide assortment of Asia-Pacific shares excluding Japan, saw a minor uptick of 0.12% but fell 1.7% the previous week. Notably, Japan remained closed for a holiday, contributing to thinner trading volumes across Asia.
In the United States, stock futures were trending downward, with S&P 500 futures dipping by 0.05% and Nasdaq futures slightly down by 0.1%. Likewise, Euro Stoxx 50 and FTSE futures were both down by 0.1%.
Adding to the concerns about China’s economic recovery, new consumer inflation data released on Sunday indicated an unexpected easing in September, and producer price deflation intensified. This has led to increased pressure on the government to unveil further stimulus efforts. Reflecting the subdued sentiment towards China’s economic prospects, the offshore yuan decreased by 0.2%, trading at 7.0842 per dollar. Similarly, the Australian dollar, often seen as a substitute for the yuan in trading, fell 0.15% to $0.6741.
Despite the weekend’s letdown regarding stimulus details, analysts at Goldman Sachs have slightly increased their real GDP forecast for China, now estimating growth to reach 4.9% this year, up from a previous estimate of 4.7%. They noted, “While we’ve enhanced our cyclical outlook due to a more comprehensive and coordinated approach to stimulus in China, our long-term view remains unchanged. The ‘3D’ challenges—deteriorating demographics, an ongoing debt-deleveraging trend, and changes in global supply chains—are not expected to reverse swiftly with the latest policy adjustments.”
Traders are now anticipating the release of China’s third-quarter GDP data, scheduled for Friday, which will likely provide additional insights into the health of the economy.
Meanwhile, currency movements were relatively stable. The U.S. dollar continued to find support from diminished expectations for a significant rate cut by the Federal Reserve next month. The British pound declined by 0.18% to $1.3043, while the euro slipped 0.13% to $1.0922.
In the commodities sector, oil prices fell sharply, with Brent crude seeing a decrease of 1.39%, sitting at $77.95 per barrel, and U.S. West Texas Intermediate crude down by 1.4% to $74.50 per barrel. This decline is partly attributed to the disappointing inflation numbers and ongoing uncertainty surrounding China’s stimulus measures, raising concerns about demand projections. Additionally, spot gold prices edged down by 0.35% to $2,646.63 per ounce.
As the situation unfolds, investors will be eagerly monitoring developments in Asian markets and the implications of Chinese economic policy changes on global economic conditions. The coming days will be pivotal as traders assess the potential impacts of government actions on market stability and growth prospects in the region.