Asian stocks are awaiting the response of Chinese markets to the promises of economic stimulus by Reuters
Written by Rae Wee
SINGAPORE (Reuters) – Asian shares did not bounce back from holiday-shortened trading on Monday, as investors worried about how Chinese markets would react to the government's economic stimulus pledges over the weekend, although they were broad, vague on details.
Finance Minister Lan Foan promised to “significantly increase” the debt, but left investors guessing about the size of the entire stimulus, a key detail needed to measure the duration of the stock market rally.
Chinese stocks have been on the tear since the government late last month announced its strongest stimulus since the outbreak began, although some of that rally has lost steam as investors await further details of support measures.
“As we head into the weekend eagerly anticipating a clear announcement of China's monetary stimulus at Saturday's MOF meeting, the fact that this was not forthcoming puts the market at risk of disappointment earlier this week,” said Ray Attrill, head of FX Strategy at National Australia. Bank (OTC:).
“Uncertainty about the full extent of monetary easing and the extent to which there will be direct relief for consumers will keep markets volatile.”
MSCI's broad index of Asia-Pacific shares outside Japan ended up 0.12%. It was down 1.7% last week.
Trading in Asia was limited on Monday as Japan will go on holiday.
US stock futures are currently down 0.05% while Nasdaq futures are down 0.1%.
EUROSTOXX 50 futures also decreased by 0.1% each.
And in a blow to China's growth outlook, consumer inflation eased suddenly in September while producer price declines deepened, data on Sunday showed, mounting pressure for more stimulus.
Reflecting the weekend's disappointment, it fell 0.2% to 7.0842 per dollar in early Monday trade.
The Australian dollar, which is often used as a liquid proxy, fell 0.15% to $0.6741.
Still, several recent stimulus promises prompted analysts at Goldman Sachs to raise their forecast for China's real gross domestic product this year to 4.9% from 4.7%.
“Although we have upgraded our cyclical view on the back of China's strong and consolidated stimulus, our structural view on China's growth remains unchanged,” the analysts wrote in a client note.
“The '3D' challenges – demographic collapse, the trend towards multi-year debt cancellations, and the global deleveraging drive – are unlikely to be reversed by the latest round of policy cuts.”
China's third quarter GDP data is due on Friday.
Elsewhere, currency movements were largely muted, as the US dollar continued to find support on bets the Federal Reserve will cut interest rates next month.
Sterling fell 0.18% to $1.3043 while the euro fell 0.13% to $1.0922.
Traders have sold any chance of a 50-basis-point rate cut from the Fed in November after data last week showed consumer prices rose more slowly than expected in September and recent economic releases have underscored the strength of the labor market.
In commodities, oil prices fell more than $1 a barrel on Monday as disappointing inflation data and a lack of clarity on stimulus plans in China fueled fears about demand. [O/R]
futures ended down 1.39% at $77.95 a barrel while US West Texas crude futures fell 1.4% to $74.50.
was down 0.35% to $2,646.63 an ounce. [GOL/]
