China’s Stocks Decline Amid Broader Asian Rally: Markets Wrap

(Bloomberg) — Chinese shares underperformed the region after investors paused on the rally with Beijing refusing to commit to more economic stimulus. Shares elsewhere in Asia gained.

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The CSI300 index fell as much as 5%, almost erasing gains of yesterday, while stocks in Hong Kong gained 1.7% after the biggest tumble in 16 years Tuesday. Shares in Australia and Japan climbed Wednesday after a tech rally lifted Wall Street and bets on Federal Reserve rate cuts stabilized.

New Zealand’s dollar fell and bonds rose after the nation’s central bank delivered a 50 basis-point cut on its benchmark rate. It is the Reserve Bank of New Zealand’s second straight reduction after it began its easing cycle with a quarter-point cut in August.

Concerns mounted that the latest burst of stimulus may be insufficient to convince investors of a sustainable rally in the country’s equity market. A news report that cited Premier Li Qiang late Tuesday indicated China needs to introduce policies to stabilize growth and expectations, in a further sign Beijing is attempting to build confidence among investors.

Tuesday’s sharp drop in Hong Kong stocks “can be considered somewhat of a clearing event for purging some excess inflated overinflated expectations of stimulus from the market,” said Timothy Moe, Goldman Sachs’ chief Asia Pacific equity strategist. “We’ve level set things and I would think that from here we probably find a floor.”

Elsewhere in Asia, India will unveil its rate decision later today while 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

Treasuries were little changed after steadying Tuesday following a run of selling in the prior four sessions, amplified by last week’s US jobs data that weighed on rate-cut expectations. With inflation data due later in the week, the US 10-year yield fell one basis point to just above 4%, while front-end yields fell by a sharper margin as investors parsed comments from Federal Reserve officials.

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 Federal Reserve’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 were little changed as of 10:07 a.m. Tokyo time
Nikkei 225 futures (OSE) rose 1.1%
Japan’s Topix rose 0.5%
Australia’s S&P/ASX 200 rose 0.6%
Euro Stoxx 50 futures rose 0.2%

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0977
The Japanese yen was little changed at 148.28 per dollar
The offshore yuan was little changed at 7.0688 per dollar
The Australian dollar was little changed at $0.6745

Cryptocurrencies

Bitcoin fell 0.3% to $62,188.62
Ether was little changed at $2,440.98

Bonds

The yield on 10-year Treasuries was unchanged at 4.01%
Japan’s 10-year yield was little changed at 0.925%
Australia’s 10-year yield was little changed at 4.17%

Commodities

This story was produced with the assistance of Bloomberg Automation.