(Bloomberg) — Asian markets are set for a cautious start as the Chinese Finance Ministry’s briefing this weekend was disappointing and a drop in factory prices heightened concerns about the country’s economy.
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Australian and New Zealand dollars fell against the greenback in early trading on Monday. US stock futures fell in Asia after the S&P 500 rose 0.6% on Friday. Japanese markets are closed for a public holiday, while trading resumes in Hong Kong after a three-day weekend. Elsewhere, oil prices fell by more than 1%, while gold prices fell.
Investors will be watching Chinese markets after Finance Minister Lan Fo’an promised more support for the struggling real estate sector and hinted at an increase in government borrowing, without providing a monetary figure that markets were looking for. In addition, data on Sunday showed that Chinese consumer prices remained weak and factory prices fell for the 24th straight month, underscoring the need for more policy support.
“Markets are likely disappointed that China’s Ministry of Finance has not announced concrete additional stimulus measures,” Richard Franulovich, head of FX strategy at Westpac Banking Corp., wrote in a note to clients. “Although a more conclusive market picture will follow when Chinese local markets open later Monday.”
Patience is running out among investors, who have been waiting for more fiscal measures to support the rally fueled by the stimulus wave unleashed by authorities in late September. The CSI 300 Index, a benchmark for domestic equities, hit its biggest weekly loss since late July on Friday, while the Aussie and Kiwi – benchmarks of Chinese sentiment among developed market currencies – fell for a second week for the first time in a month .
“As market participants efficiently seek price certainty on China’s growth prospects, the lack of immediate clarity on China’s efforts to restart the economy is unlikely to be well taken,” said Chris Weston, head of research at Pepperstone Group. “However, there was a message of strong intent and a challenging attitude to meet the 5% of GDP target, with a clear appetite for a significant increase in the fiscal deficit and a possible move away from the 3% deficit limit – a factor possible to limit any initial impact on equity.”
In the US, the S&P 500 surpassed the 5,800 mark on Friday, notching its 45th record of 2024 as major banks recovered after JPMorgan Chase & Co. announced a surprising increase in net interest income. Australian share futures rose 0.6% on Friday while contracts for Chinese shares fell, moves that came ahead of the MOF briefing.
The U.S. dollar was mixed against its peers in early trading after rising for a second week as traders lowered expectations about the pace of Federal Reserve interest rate cuts. The Treasury curve steepened on a second day on Friday, with yields on 2-year bonds little changed at 3.96%, while those on 10-year bonds rose 4 basis points to 4.1%. Cash Treasuries are closed in Asia due to the holiday in Japan.
“Whether the Fed decides to cut rates faster or more gradually, we believe the trajectory remains unchanged,” Solita Marcelli, chief investment officer for the Americas at UBS Group AG’s asset management unit, wrote in a note. “We continue to recommend that investors position themselves for a lower interest rate environment” by deploying cash in investment-grade intermediate-term bonds and quality stocks, she wrote.
Chinese growth and retail sales data are due this week, while inflation figures are expected in New Zealand, Canada and the UK. The central banks of Thailand, the Philippines and Indonesia will make policy decisions ahead of the European Central Bank later this week.
“Apparently softer activity data and accelerating disinflation have had an immediate impact on both ECB communications and markets, which now assess a 95% probability of a 25 basis point cut this week,” wrote Barclays strategists including Themistoklis Fiotakis , in a note to customers. “We view risks to European macro and interest rates as skewed to the downside, leaving room for further euro weakness, especially at crossroads.”
Main events this week:
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Chinese trade balance, Monday
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Singapore GDP, Monday
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CPI India, Monday
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UK unemployment rate and average weekly wage, Tuesday
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Industrial production in the eurozone, Tuesday
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CPI Canada, Tuesday
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Goldman Sachs, Bank of America, Citigroup earnings, Tuesday
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Republican presidential candidate Donald Trump will be interviewed by Bloomberg editor-in-chief John Micklethwait at the Economic Club of Chicago on Tuesday
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New Zealand CPI, Wednesday
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Interest rate decisions by the central banks of Thailand, the Philippines and Indonesia, Wednesday
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UK CPI, PPI, RPI and house price index, Wednesday
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ASML, Morgan Stanley earnings figures, Wednesday
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Australian unemployment, Thursday
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Eurozone CPI, ECB interest rate decision, Thursday
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US retail sales, unemployment claims, industrial production, corporate inventories, Thursday
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TSMC, Netflix earnings, Thursday
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Japanese CPI, Friday
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China’s GDP, retail sales, industrial production, house prices, Friday
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UK retail sales, Friday
Some of the major moves in the markets:
Stocks
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0930
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The Japanese yen was little changed at 149.23 per dollar
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The offshore yuan fell 0.2% to 7.0839 per dollar
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The Australian dollar fell 0.2% to $0.6735
Cryptocurrencies
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Bitcoin rose 0.4% to $62,984.22
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Ether rose 0.7% to $2,478.26
Bonds
Raw materials
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West Texas Intermediate crude fell 1.2% to $74.65 a barrel
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Gold fell 0.4% to $2,647.21 an ounce
This story was produced with the help of Bloomberg Automation.
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