Asian Investors Wary as China Briefing Underwhelms: Wrapping Markets

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(Bloomberg) — Asian markets are poised for a cautious start as China’s Finance Ministry briefing at the weekend underwhelmed and a drop in factory prices added to concerns over the nation’s economy.

Australian and New Zealand dollars slipped 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 holiday, while Hong Kong trading resumes following a three-day weekend. Elsewhere, oil declined over 1%, while gold edged lower.

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Investors will be keeping an eye on China’s markets after Finance Minister Lan Fo’an vowed to provide more support to the struggling property sector and indicated that the government would borrow more, without revealing the headline amount that markets wanted. Separately, data on Sunday showed that Chinese consumer prices were still weak and that factory gate prices fell for the 24th consecutive month, underscoring the need for more policy support.

“Markets may be disappointed that China’s Ministry of Finance did not reveal more incentives,” Richard Franulovich, head of FX Strategy at Westpac Banking Corp., said in a note to clients. “However, the definitive market reading will come when China’s local markets open next Monday.”

Patience has worn thin for investors, who have been waiting for other financial measures to help stabilize the rally caused by the burst of stimulus introduced by the authorities in late September. The CSI 300 Index, which is a benchmark of offshore currencies, reached its biggest weekly loss since late July on Friday, while the Aussie and Kiwi – proxies for China among developed market currencies – fell for the second week for the first time in a month.

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“As market participants look to successfully price in China’s growth prospects, a lack of immediate clarity on China’s economic reform efforts is unlikely to be taken well,” said Chris Weston, head of research at Pepperstone Group. “However, there was a message of strong intent and a reluctance to meet its 5% GDP target, with a clear desire for a significant increase in the fiscal deficit and a move away from its 3% deficit limit – something that could mitigate any initial fall in the balance.”

In the US, the S&P 500 hit a high of 5,800 on Friday, notching its 45th record high in 2024 as major banks rallied after JPMorgan Chase & Co. Australian stock futures rose 0.6% on Friday while Chinese stock futures fell, moves ahead of the MOF meeting.

The US dollar was mixed against peers in early trade after rising for a second week as traders weighed expectations for the pace of the Federal Reserve’s rate cuts. The Treasury yield edged higher for a second day on Friday with the yield on the 2-year note closing slightly flat at 3.96% while the 10-year bond rose 4bps to 4.1%. Cash Treasuries are closed in Asia due to a holiday in Japan.

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“Whether the Fed decides to cut rates at a faster or slower pace, the direction of travel remains unchanged, in our view,” Solita Marcelli, chief U.S. investment officer at UBS Group AG’s wealth management unit, wrote in a note. “We continue to recommend positioning investors in a low-grade environment” by putting cash into medium-term medium-term bonds and quality stocks, he wrote.

This week, Chinese growth and retail sales data are due while inflation readings in New Zealand, Canada and the UK are expected. The central banks of Thailand, the Philippines and Indonesia will give policy decisions ahead of the European Central Bank later this week.

“The apparently soft jobs data and rapid disinflation had an immediate impact on both the ECB’s communication with the markets, which are now pricing in a 95% chance of a 25bp cut this week,” Barclays strategists including Themistoklis Fiotakis wrote in a note to clients. “We view the risks to European macro and interest rates as tilted to the downside, creating the possibility of a weaker euro, especially in the crosshairs.”

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Important events this week:

• China’s trade balance, Monday
• Singapore GDP, Monday
• India CPI, Monday
• UK unemployment rate and average weekly earnings, Tuesday
• Eurozone industrial production, Tuesday
• Canada CPI, Tuesday
• Goldman Sachs, Bank of America, Citigroup earnings, Tuesday
• Republican presidential candidate Donald Trump will be interviewed by Bloomberg editor-in-chief John Micklethwait at the Economic Club of Chicago, Tuesday.
• New Zealand CPI, Wednesday
• Thailand, Philippines and Indonesia’s central banks’ interest rate decisions, on Wednesday
• UK CPI, PPI, RPI and house prices, Wednesday
• ASML, Morgan Stanley Earnings, Wednesday
• Unemployment in Australia, Thursday
• Eurozone CPI, ECB rate decision, Thursday
• US retail sales, jobless claims, industrial production, business listings, Thursday
• TSMC, Netflix earnings, Thursday
• Japan CPI, Friday
• China’s GDP, retail sales, industrial production, domestic prices, Friday
• UK retail sales, Friday

Some of the main steps in the market:

Shares

• S&P 500 futures were little changed as of 7:16 am Tokyo time
• S&P/ASX 200 futures up 0.6%

Funds

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0930
• The Japanese yen was little changed at 149.23 per dollar
• The offshore yuan fell 0.2% to 7.0839 per dollar
• The Australian dollar fell 0.2% to $0.6735

Cryptocurrencies

• Bitcoin rose 0.4% to $62,984.22
• Ether rose 0.7% to $2,478.26

Bonds

• Australia’s 10-year yield advanced four basis points to 4.27%

Goods

• West Texas Intermediate crude fell 1.2% to $74.65 a barrel
• Local gold fell 0.4% to $2,647.21 an ounce

This story was produced with the help of Bloomberg Automation.

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