Mainland Chinese stocks returned from an extended break with a roaring start on Tuesday, though the optimism did not spill into regional share markets as Beijing fell short on delivering more details of its massive stimulus.
Hong Kong stocks, in particular, tumbled on Tuesday, reversing some of the rally they enjoyed while China’s markets were closed for the week-long National Day holiday.
China’s CSI300 blue-chip index surged 10% in early trade to its strongest since July 2022, while the Shanghai Composite Index jumped roughly the same amount to its highest mark since December 2021.
But Hong Kong’s Hang Seng Index slid 7.6%, with the Hang Seng Mainland Properties Index falling more than 10%.
That left MSCI’s broadest index of Asia-Pacific shares outside Japan down 2.2%.
“I think the movement today basically just explains that in the Chinese onshore market, it’s just rising to a level that investors are comfortable with. And in Hong Kong, there may be a bit of a profit-taking or breaking even move,” said Gary Ng, a senior economist at Natixis.
Mainland shares also erased some of their early gains over the course of the trading day, after the chairman of China’s economic planner Zheng Shanjie provided little detail of how the country plans to roll out its support measures at a closely watched press conference on Tuesday.
That disappointed investors, especially those who were hoping for more specifics on fiscal measures to stimulate the ailing Chinese economy.
The CSI300 index was last up 4.3%, while the Shanghai Composite Index retreated slightly to last trade 3.34% higher.
“Markets were hoping to obtain some guidance on the size of fiscal stimulus at this presser – but with MoF (Ministry of Finance) not in attendance, it was unlikely this information was going to be provided,” said Rong Ren Goh, a portfolio manager at Eastspring Investments.
“What’s next? No major press briefing lined up so far. Thus, it is likely we see markets consolidating and digesting what has already been announced, which arguably is meaningful, but not quite enough to satiate lofty expectations.”
Fears of a widening conflict in the Middle East also sapped bullish sentiment after Hezbollah on Monday fired rockets at Israel’s third-largest city, Haifa, and Israel looked poised to expand its offensive into Lebanon, one year after the devastating Hamas attack on Israel that sparked the Gaza war.
Stock futures fell broadly, with EUROSTOXX 50 futures sliding 1%, while FTSE futures ticked 0.6% lower.
S&P 500 futures lost 0.03% and Nasdaq futures fell 0.07%.
Elsewhere, Tokyo’s Nikkei fell more than 1%.
In commodities, oil prices pared some of their gains after jumping on Monday due to worries about supply disruptions, with Brent crude futures last down 1.5% at $79.74 a barrel.
It had surged above $80 a barrel for the first time in more than a month in the previous session.
U.S. crude futures shed 1.54% to $75.95 a barrel.
FED BETS
In the broader market, investors were reassessing the outlook for the path of the Federal Reserve’s easing cycle after Friday’s blockbuster U.S. jobs report.
Any chance of another 50-basis-point rate cut next month has been erased and traders are pricing in a 12% chance the Fed could keep rates on hold. Just 50 bps worth of cuts are priced in by December.
Expectations of a less-aggressive Fed trajectory kept the benchmark 10-year U.S. Treasury yield above 4% in Asia trade. [US/]
The two-year U.S. Treasury yield hovered near its highest level in over a month and last stood at 3.9499%.
“While confidence about another 50-bp cut is justifiably dampened … the Fed rate cut cycle is far from derailed,” said Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho Bank.
“Admittedly, the all-around blockbuster jobs report is justifiable cause to reassess overzealous ‘pivot bets’ on front-loaded, outsized cuts.”
Still, the U.S. dollar failed to get a further lift on the revised Fed expectations, having already had a strong run last week, in part because of safe-haven gains linked to escalating tensions in the Middle East.
The dollar was on the back foot, falling 0.17% against the Japanese yen to 147.95, while sterling rose 0.06% to $1.30925.
Against a basket of currencies, the greenback eased 0.08% to 102.40, though it hovered near a seven-week high hit on Friday.
Meanwhile, the onshore yuan played catch-up and slid against the dollar which had gained ground following Friday’s jobs report. The yuan was last 0.76% lower at 7.0650 per dollar.
Elsewhere, spot gold was little changed at $2,644.70 an ounce. [GOL/]
(Reporting by Rae Wee and Vidya Ranganathan)
