(Bloomberg) — Chinese stocks underperformed gains during the week-long holiday, as investors hoping for more economic stimulus from the Chinese government were disappointed. Hong Kong’s main indexes fell the most in 16 years, and European futures also fell.
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The benchmark CSI 300 index rose 11%, paring gains to 2% after a widely expected stimulus package was absent from a press conference in Beijing. The index has since recovered a bit. Chinese stock prices in Hong Kong fell by the most during the day since 2008, as some investors took profits and moved to mainland stocks. Trading volume in Chinese stocks soared to a record high of 2.6 trillion yuan ($368 billion).
Asian stocks were broadly lower as Wall Street was dragged down by a decline in tech stocks, geopolitical unrest and bets that the U.S. Federal Reserve would cut interest rates less. MSCI’s Asia-Pacific stock index fell the most in two months, the U.S. Treasury curve steepened and oil fell.
No further economic stimulus measures were announced at a press conference by China’s National Development and Reform Commission, after stock prices in China and Hong Kong soared on policy announcements ahead of Golden Week. Many investors, from JPMorgan Asset Management to HSBC Global Private Banking, questioned the sustainability of the rally.
“While it is true that the policy tone remains supportive, the limited new measures have so far disappointed the market,” said Lin Song, Greater China chief economist at ING Bank NV. It seems so.” “Future market trends are likely to depend on the speed and strength of further policy follow-up by other ministries.”
The S&P 500 fell 1% on Monday after a four-week winning streak. U.S. Treasuries continued to fall after Friday’s strong jobs report, with the 10-year yield above 4%. New York Fed President John Williams said in an interview with the Financial Times that the Fed is “well positioned” to give the economy a soft landing.
“Friday’s strong jobs report not only appeared to eliminate the possibility of a 50 basis point rate cut in November, but also made it more likely that the Fed would keep rates on hold if economic data continues to be stronger than expected. “It sparked a conversation about whether this was the case,” said Chris Larkin of the E. *Transactions from Morgan Stanley. “But as last week showed, geopolitics cannot be ignored.”
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At the NDRC press conference, Chinese officials refrained from imposing additional stimulus measures, but said they were confident of achieving their economic goals this year and pledged further support for growth. China will continue issuing super-long-term bonds next year to support major projects and invest 100 billion yuan, he said.
“I wouldn’t be surprised to see more volatility around an event like the NDRC right now because expectations are high,” said Philip Uhl, head of portfolio management at Rayliant Global Advisors. “I believe policymakers are taking a different tack now. That’s our focus in the medium to long term.”
Marvin Chen, a strategist at Bloomberg Intelligence, said there is some convergence in the market as investors circulate money from Hong Kong to China and benefit mainland stocks.
Invesco and Nomura Holdings are among the companies viewing the recent economic recovery with skepticism and waiting for the Chinese government to back up its stimulus promises with real money.
Overheating in the A-share market and the implementation of the Chinese government’s recently announced policy stimulus are among the risks investors should be aware of amid the rally in China’s stock market, according to Morgan Stanley.
The Middle East crisis continues to spook investors, with fighting escalating on multiple fronts on Monday after a year of war. The Israel Defense Forces said it intercepted most of the barrage of rockets fired toward Tel Aviv by Hamas and other Iranian-backed groups. Brent crude rose to its highest since August as speculation increased that Israel could attack Iran’s oil infrastructure. West Texas Intermediate rose early Tuesday.
Further geopolitical escalation could spur a risk-off trade in which growth stocks underperform value stocks, according to Morningstar’s Dave Sekera.
“Typically you would see a rotation into defensive stocks in risk-off trades, but if you were an investor today you would be careful,” he said. “Some of the defense sectors are already overvalued today. Unlike a typical risk-off trade, I think oil stocks will rise.”
This week’s main events:
Fed’s Rafael Bostic, Susan Collins, Philip Jefferson and Adriana Kugler speak on Tuesday
Fed Minutes, Wednesday
Fed’s Rory Logan, Rafael Bostic, Austan Goolsby and Mary Daly speak Wednesday
U.S. new jobless claims, CPI, Thursday
Fed’s John Williams and Thomas Barkin speak on Thursday
JPMorgan and Wells Fargo kick off earnings season for big Wall Street banks on Friday.
US PPI, University of Michigan Consumer Sentiment, Friday
Fed’s Laurie Logan, Austan Goolsby and Michelle Bowman speak on Friday
The main movements in the market are:
stock
S&P 500 futures were little changed as of 6:53 a.m. London time.
Nasdaq 100 futures fell 0.1%
Dow Jones Industrial Average futures little changed
MSCI Asia Pacific Index falls 2.1%
MSCI Emerging Markets Index falls 2%
Japan’s TOPIX fell 1.6%
Hong Kong’s Hang Seng falls 8.1%
The Shanghai Composite rose 2.7%.
Euro Stoxx50 futures fall 0.9%
currency
Bloomberg Dollar Spot Index little changed
The euro was almost unchanged at $1.0982.
The Japanese yen rose 0.2% to 147.92 yen to the dollar.
The offshore yuan was almost unchanged at 7.0690 yuan to the dollar.
The British pound was almost unchanged at $1.3091.
cryptocurrency
Bitcoin fell 1% to $62,368.2.
Ether fell 0.7% to $2,423.87.
bond
The 10-year Treasury yield fell 3 basis points to 4.00%.
Germany’s 10-year bond yield rose 5 basis points to 2.26%.
The UK 10-year bond yield rose 8 basis points to 4.21%.
Japan’s 10-year bond yield remains almost unchanged at 0.925%
The Australian 10-year bond yield rose nine basis points to 4.17%.
merchandise
This article was produced in partnership with Bloomberg Automation.
–With assistance from Sherry Ahn, April Ma, Jason Scott, and Qizi Sun.
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