(Bloomberg) — Chinese equities led losses in Asia on Wednesday as traders weighed weak economic data and Beijing’s reluctance to commit to more stimulus.
Most Read from Bloomberg
The benchmark CSI 300 Index tumbled as much as 7.4%, its biggest fall since 2020 with the losses erasing Tuesday’s gains, when markets returned from the Golden Week holiday. US equity futures also slipped following a report that the US Justice Department was weighing a breakup of Google. Ten-year Treasury yields hovered around the key 4% mark and oil steadied after tumbling the most in more than a year.
Concerns in China have mounted that the latest burst of stimulus may be insufficient to convince investors of a sustainable rally in the equity market. Chinese tourists shelled out less money during their long holiday while a news report indicated the nation needs to introduce policies to stabilize growth and expectations. That’s a further sign Beijing is attempting to build confidence among investors.
“For the markets to sustain enthusiasm, far more aggressive gestures for the new fiscal package or market stabilization mechanism might be necessary,” said Homin Lee, senior macro strategist at Lombard Odier. “It’s possible that these gyrations persist until the National People’s Congress Standing Committee meeting and also the US election in early November.”
The National Development and Reform Commission, China’s economic planning agency, announced that a meager 200 billion yuan ($28 billion) in spending would be advanced from next year, after analysts estimated a fiscal package worth as much as 3 trillion yuan in the pipeline.
A gauge of Asian shares fell for a second session on Wednesday with stocks in Hong Kong falling more than 3%. Confidence in the bull run in China is fading “just as rapidly as it had momentum not long ago,” said Hebe Chen, an analyst at IG Markets Ltd.
A growing number of strategists and fund mangers have in recent days expressed skepticism about the rally, saying Beijing needs to back up its spending pledges with real money. Some are also concerned that many stocks have already reached overvalued levels.
“No further policies from the NDRC yesterday has disappointed the market,” said Steven Leung, executive director at UOB Kay Hian Hong Kong Ltd. “Volatility is likely to continue into fourth quarter, but liquidity will come back, wait for pull back to jump in, especially from those overseas institutions who have been very underweight greater China.”
In corporate news, Alimentation Couche-Tard Inc. sent Seven & i Holdings Co. a new potential acquisition price of ¥7 trillion ($47.2 billion), showing that the Canadian company is still seeking to enter takeover talks after its initial bid was rejected. The Japanese company’s shares surged as much as 12%.
Elsewhere in Asia, New Zealand’s dollar and bond yields fell after the nation’s central bank delivered a 50 basis-point cut on its benchmark rate, while the Reserve Bank of India left rates unchanged. The RBI changed its monetary policy to neutral, sending shares higher. South Korea will join FTSE Russell’s benchmark bond index, capping months of official campaigning and a overhaul of financial market infrastructure.
US Rate-Cut Expectations
Fed Bank of Boston President Susan Collins noted that rate cuts should be careful and data-based. Her Atlanta counterpart Raphael Bostic said while risks to inflation have come down, threats to the labor market have risen, though the economy is still strong. Governor Adriana Kugler said officials should keep the focus on bringing inflation to target, with a “balanced approach” that avoids a slowdown in jobs.
“The US data is not so strong that the Fed’s contribution to the global rate-cutting cycle looks set to end,” said Mark Haefele at UBS Global Wealth Management. “We therefore maintain our conviction for investors to position for lower rates.”
Key events this week:
-
Fed minutes, Wednesday
-
Fed’s Lorie Logan, Raphael Bostic, Austan Goolsbee and Mary Daly speak, Wednesday
-
US CPI, initial jobless claims, Thursday
-
Fed’s John Williams and Thomas Barkin speak, Thursday
-
JPMorgan, Wells Fargo kick off earnings season for the big Wall Street banks, Friday
-
US PPI, University of Michigan consumer sentiment, Friday
-
Fed’s Lorie Logan, Austan Goolsbee and Michelle Bowman speak, Friday
Some of the main moves in markets:
Stocks
-
S&P 500 futures fell 0.2% as of 1:08 p.m. Tokyo time
-
Japan’s Topix rose 0.1%
-
Australia’s S&P/ASX 200 rose 0.2%
-
Hong Kong’s Hang Seng fell 1.4%
-
The Shanghai Composite fell 5.3%
-
Euro Stoxx 50 futures fell 0.1%
-
Nasdaq 100 futures fell 0.3%
Currencies
-
The Bloomberg Dollar Spot Index was little changed
-
The euro fell 0.1% to $1.0968
-
The Japanese yen was little changed at 148.33 per dollar
-
The offshore yuan was little changed at 7.0685 per dollar
-
The Australian dollar fell 0.2% to $0.6731
Cryptocurrencies
-
Bitcoin was little changed at $62,357
-
Ether was little changed at $2,443.51
Bonds
Commodities
-
West Texas Intermediate crude rose 0.4% to $73.85 a barrel
-
Spot gold fell 0.1% to $2,618.16 an ounce
This story was produced with the assistance of Bloomberg Automation.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.
