SINGAPORE: Asian stocks hardly budged in early holiday-thinned trade on Monday, with investors nervous as to how markets in mainland China would react to government economic stimulus promises over the weekend which, though broad, were light on detail.
Minister of Finance Lan Foan pledged to “significantly increase” debt, but left investors guessing on the overall size of the stimulus, a vital detail needed to gauge the longevity of a stock market rally.
Chinese stocks have been on a tear since the government late last month announced its most aggressive stimulus since the pandemic, though some of that rally has since lost momentum as investors await further details of the support measures.
“Having gone into the weekend keenly anticipating an explicit China fiscal stimulus announcement at Saturday’s MOF briefing, the fact this was not forthcoming risks the market reacting with disappointment at the start of this week,” said Ray Attrill, head of FX strategy at National Australia Bank.
“Uncertainty over the overall extent of fiscal loosening and to what extent there will be direct help for consumers will keep markets on tenterhooks.”
MSCI’s broadest index of Asia-Pacific shares outside Japan was last up 0.12%. It fell 1.7% last week.
Trading in Asia was thinned on Monday with Japan out for a holiday.
US stock futures meanwhile edged lower, with S&P 500 futures losing 0.05% while Nasdaq futures fell 0.1%.
EUROSTOXX 50 futures and FTSE futures similarly eased 0.1% each.
Chinese stocks climb; dollar steady before US inflation test
Also in a blow to China’s growth outlook, consumer inflation unexpectedly eased in September while producer price deflation deepened, data on Sunday showed, increasing pressure for more stimulus.
Reflecting the weekend disappointment, the offshore yuan fell 0.2% to 7.0842 per dollar in early Monday trade. The Australian dollar, often used as a liquid proxy for the onshore yuan, eased 0.15% to $0.6741.
Still, the latest raft of stimulus pledges prompted analysts at Goldman Sachs to raise their real gross domestic product forecast for China this year to 4.9% from 4.7%.
“While we have upgraded our cyclical view on the back of the more forceful and coordinated China stimulus, our structural view on China’s growth has not changed,” the analysts wrote in a client note.
“The ‘3D’ challenges - deteriorating demographics, a multi-year debt deleveraging trend, and the global supply chain de-risking push - are unlikely to be reversed by the latest round of policy easing.”
China’s third-quarter GDP data is due on Friday. Elsewhere, movement in currencies were largely subdued, with the US dollar continuing to draw support from reduced bets of an outsized Federal Reserve interest rate cut next month.
Sterling fell 0.18% to $1.3043 while the euro eased 0.13% to $1.0922.
Traders have priced out any chance of a 50-basis-point rate cut from the Fed in November after data last week showed consumer prices rose slightly more than expected in September and recent economic releases have also underscored strength in the labour market.
In commodities, oil prices fell by more than $1 a barrel on Monday as the disappointing inflation data and lack of clarity in stimulus plans in China stoked fear about demand.
Brent crude futures were last down 1.39% at $77.95 a barrel while US West Texas Intermediate crude futures fell 1.4% to $74.50.
Spot gold eased 0.35% to $2,646.63 an ounce.
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