Asian Stocks Drop as China Support Disappoints: Markets Wrap

(Bloomberg) — Asian shares declined after China’s debt swap program looked insufficient to some investors and data showed persistent deflationary pressures in the world’s No. 2 economy.

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A gauge of the region’s equities dropped as much as 1.3%, led by heavyweights including Tencent Holdings and Meituan. China’s CSI 300 benchmark fell as much as 1.4%, before erasing those losses to trade slightly higher. An index of Chinese companies listed in Hong Kong shed 1.6%.

The broad weakness reflects lingering concerns about the prospect of the world’s No. 2 economy, after Beijing unveiled a 10 trillion yuan ($1.4 trillion) program to defuse local governments’ debt risk but stopped short of unleashing new fiscal stimulus. In addition to anemic inflation, sentiment toward China is also faltering as foreign direct investment continues to slump.

Investors had hoped for more potent stimulus measures that would directly boost demand from a key Chinese legislature meeting last week, especially after Donald Trump’s presidential victory injected fresh uncertainty over tariffs. To many economists, Beijing’s stance signals an intention to preserve room to better respond to a potential trade war when Trump takes office next year.

“There will be a lot more volatility” for Chinese equities, Ecaterina Bigos, chief investment officer for Asia excluding Japan at AXA Investment Managers, told Bloomberg Television. While policy announcements on matters such as real estate have helped sentiment, “the fundamental picture has not changed yet. We haven’t seen that in earnings yet.”

UBS lowered its 2025 growth forecast for China following Trump’s election, expecting an “around 4%” expansion for 2025, and a “considerably lower” pace in 2026.

Oil fell for a second day as a soft outlook for top importer China continued to plague the market, while iron ore declined toward $100 a ton.

Elsewhere, Taiwan Semiconductor Manufacturing Co. slipped after a Reuters’ report saying the US told the firm to halt shipments of some advanced chips often used in AI applications to Chinese customers.

Bitcoin surged past $81,000 for the first time, driven by the incoming president’s support for digital assets and the election of pro-crypto lawmakers. A bevy of smaller cryptocurrencies have also rallied.

The dollar was broadly steady. The yen fell 0.6% against the greenback, ahead of the Japanese parliament’s vote later Monday that’s likely to keep Prime Minister Shigeru Ishiba in the job despite a national election setback.

Meanwhile, Bank of Japan board members discussed the need for caution on raising its benchmark rate and offered no clear hint of a move next month, a summary of opinions from its October policy meeting showed.

Federal Reserve Bank of Minneapolis President Neel Kashkari indicated at the weekend the central bank could ease rates less than previously expected amid a strong US economy. Kashkari emphasized, however, that it’s too early to determine the impact of Trump’s policies.

“The market’s next move will hinge on whether Trump prioritizes cutting taxes or raising tariffs, each having vastly different impact,” Tony Sycamore, an analyst at IG Markets in Sydney, wrote in a note. “This clarification may still be months away and it’s worth remembering that back in 2016, Trump’s first move was to cut taxes which sent stock markets surging before tariffs on China caused headwinds.”

This week, traders will be parsing data from Australian jobs to Chinese retail sales and industrial production, inflation from the US and the Eurozone as well as growth readings in the UK and Japan. A swath of Federal Reserve officials are scheduled to speak which may help indicate the central bank’s thinking following the election result.

Key events this week:

Japan current account, Monday
Denmark CPI, Monday
Norway CPI, Monday
United Nations climate change conference, COP29 begins, Monday
Germany CPI, Tuesday
UK jobless claims, unemployment, Tuesday
Fed speakers including Christopher Waller, Tuesday
Japan PPI, Wednesday
Eurozone industrial production, Wednesday
US CPI, Wednesday
Australia unemployment, Thursday
Eurozone GDP, Thursday
US PPI, jobless claims, Thursday
Reserve Bank of Australia Governor Michele Bullock speaks, Thursday
Fed Chair Jerome Powell speaks, Thursday
ECB President Christine Lagarde speaks, Thursday
BOE Governor Andrew Bailey speaks, Thursday
Japan GDP, industrial production, Friday
China retail sales, industrial production, fixed-asset investment, Friday
UK GDP, industrial production, trade balance, Friday
US retail sales, Friday
Alibaba earnings, Friday

Some of the major moves in markets:

Stocks

S&P 500 futures rose 0.2% as of 2:35 p.m. Tokyo time
Nikkei 225 futures (OSE) were little changed
Japan’s Topix fell 0.2%
Hong Kong’s Hang Seng fell 1.8%
The Shanghai Composite rose 0.1%
Euro Stoxx 50 futures rose 0.4%

Currencies

The Bloomberg Dollar Spot Index rose 0.1%
The euro was little changed at $1.0714
The Japanese yen fell 0.6% to 153.62 per dollar
The offshore yuan was little changed at 7.2016 per dollar

Cryptocurrencies

Bitcoin rose 1.4% to $81,049.57
Ether fell 0.6% to $3,152.34

Bonds

Commodities

West Texas Intermediate crude fell 0.4% to $70.08 a barrel
Spot gold fell 0.6% to $2,669.25 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from John Cheng.

(An earlier version of this article corrected the currency conversion in the second paragraph.)