A look at the day ahead at Rae Wee’s European and global markets
Investors hoping for a roaring restart of China’s stock market rally after the mainland’s weeklong holiday were disappointed Tuesday as Beijing policymakers gave only broad brushstrokes on stimulus plans at a high-profile news conference.
The National Development and Reform Commission (NDRC) said it had “full confidence” in achieving its targets, but did not provide details sought by investors about China’s aggressive stimulus measures.
Although the mainland’s major stock indexes rose 10% to multi-year highs shortly after the open, those gains were quickly reversed.
In stark contrast to the mainland, Hong Kong stocks showed a sea of red, with the Hang Seng Index plunging more than 10% at one point.
Analysts initially attributed the difference to Chinese stocks catching up as Hong Kong rose while the mainland was on holiday, but it soon became clear that markets were disappointed by the lack of specific stimulus from Beijing.
That made for a negative open for Europe, with stock futures falling in the Asian hours.
EUROSTOXX 50 futures fell 0.8%, while FTSE futures fell 0.5%.
The economic calendar is relatively light today, keeping the focus squarely on China, although fears of an escalating conflict in the Middle East and a reassessment of Federal Reserve expectations will also remain on the agenda for investors.
Oil prices fell on Tuesday – partly due to events in China, although this was also due to a small step back after a strong rally at the start of the week on developments in the Middle East. Hezbollah fired rockets at Haifa and Israel appeared ready to expand its offensive into Lebanon.
Concerns about oil supply disruptions have sent Brent and US crude futures up more than 10% this month, and this seems unlikely to change anytime soon.
As for the Fed, the market’s short-lived belief that it would remain on an easing path disappeared after Friday’s successful payrolls report. Market prices now point to another 50 basis points of rate cuts in December.
10-year Treasury yields remained above 4% on Tuesday, reflecting less aggressive expectations, while two-year yields hovered near their highest levels in more than a month.
Key developments that could impact the markets on Tuesday:
– European Central Bank and Federal Reserve policymakers speak
– Germany industrial production (August)
(By Rae Wee; editing by Edmund Klamann)
