Chinese stocks underperformed their Asian counterparts on Friday as caution grew among investors ahead of a key weekend briefing that is expected to shed light on Beijing’s fiscal stimulus plans. The CSI 300 Index, which tracks the largest companies listed on the Shanghai and Shenzhen stock exchanges, fell by 2.4% in afternoon trading. This drop comes as markets across Asia fluctuated within narrow ranges, with stocks in Japan and Australia following Wall Street’s lead after core inflation data in the U.S. exceeded expectations.
Investor Concerns Over Beijing’s Economic Stimulus
All eyes are on a Saturday briefing by China’s finance minister, where market participants anticipate the announcement of additional measures to revive the country’s slowing economy. Analysts expect Beijing to roll out up to 2 trillion yuan ($283 billion) in fresh fiscal stimulus aimed at boosting growth and restoring investor confidence. However, concerns over the potential for another disappointment have weighed on Chinese stocks.
Kieran Calder, head of equity research for Asia at Union Bancaire Privée, noted that “the risk of another disappointment with tomorrow’s Ministry of Finance briefing” is affecting the market, as uncertainty surrounds whether the briefing will include concrete details on new stimulus measures. Calder highlighted the fact that the Ministry of Finance (MOF) does not have the authority to approve additional budgets or bond quotas, further heightening investor apprehension.
Global Market Reactions
Elsewhere, European futures remained steady, tracking U.S. markets, where the S&P 500 and Nasdaq 100 saw modest declines on Thursday — down 0.2% and 0.1%, respectively. Meanwhile, Hong Kong markets were closed on Friday for a holiday, leaving Chinese stocks as the region’s main focus.
Treasury yields were also steady in early Asian trading after a drop in the U.S. two-year and ten-year yields on Thursday. This comes as investors digest Thursday’s economic data, which included stronger-than-expected U.S. inflation figures and a rise in unemployment claims.
Fed’s Response to Hotter-Than-Expected Inflation
The U.S. Federal Reserve’s challenge of tackling inflation was underscored by September’s core inflation data, which rose more than anticipated. Despite the uptick, Fed officials, including John Williams, Austan Goolsbee, and Thomas Barkin, were largely unfazed, with many signaling that the central bank can continue its path toward lower rates. The exception was Raphael Bostic of the Atlanta Fed, who indicated in a Wall Street Journal interview that he called for one additional quarter-point rate cut across the Fed’s two remaining meetings in 2024.
Market expectations for a Fed rate cut in November remain stable, with traders pricing in roughly an 80% chance of a 25 basis point cut. Although recent jobs data had caused some uncertainty, many market participants believe that the inflation figures and rising unemployment claims won’t drastically alter the overall economic outlook.
Currency and Oil Market Movements
In the currency markets, the yen remained relatively unchanged at around 148 per dollar after strengthening on Thursday, while the U.S. dollar index also stayed steady. The South Korean won held onto gains following the Bank of Korea’s expected rate cut of 25 basis points, lowering the key interest rate to 3.25%.
Oil prices edged lower, paring gains from Thursday when West Texas Intermediate (WTI) futures surged by 3.6% amid escalating tensions in the Middle East. Traders are now awaiting Israel’s potential response to Iran’s missile attack, which could further affect the oil market.
Conclusion
Investors are also gearing up for the release of third-quarter earnings reports from major U.S. financial institutions, including JPMorgan Chase & Co., Wells Fargo & Co., and Bank of New York Mellon Corp. later on Friday. JPMorgan’s outlook on net interest income will be closely watched, especially after company executives sought to manage expectations for this key revenue stream. Wells Fargo investors will look for updates on the bank’s asset cap, while BNY Mellon is expected to report its fastest revenue growth in over a year. As markets await these developments, global economic uncertainty and ongoing fiscal stimulus discussions in China continue to shape investor sentiment heading into the weekend.
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