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The Chinese yuan played catch up, sliding against the dollar | (Photo: Reuters)
Mainland Chinese stocks returned from an extended break with a roaring start on Tuesday, scaling multi-year highs as investor exuberance over Beijing’s aggressive stimulus measures showed no signs of easing.
The optimism though failed to spill over into other share markets in Asia, particularly Hong Kong, which reversed some of the rally it enjoyed while China was out on a week-long holiday.
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China’s CSI300 blue-chip index surged 10 per cent in early trade to its highest level 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 tumbled 3.9 per cent, with the Hang Seng Mainland Properties Index sliding more than 7 per cent.
That left MSCI’s broadest index of Asia-Pacific shares outside Japan down more than 1 per cent.
“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.
“Because no one is really certain about what is going on in the stimulus… there could be a bit of uncertainties about whether it is above or below market expectations.” Investors are watching a press conference by China’s National Development and Reform Commission, the country’s national economic and social planning agency, for further details about the stimulus pledges which had also sparked a rally in Chinese stocks before the holidays.
Elsewhere, Tokyo’s Nikkei fell more than 1 per cent.
S&P 500 and Nasdaq futures were steady.
Fears of a widening conflict in the Middle East 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.
Worries such a conflict would disrupt oil supplies sent Brent crude futures on Monday surging above $80 a barrel for the first time in over a month, although they pared some gains on Tuesday in Asia.
The front month was last 0.58 per cent lower at $80.45 per barrel, while US crude futures shed 0.53 per cent to $76.73 a barrel.
Analysts at ANZ said concerns Israel might target Iran’s oil infrastructure had fuelled the rally and that comments from US
President Joe Biden hadn’t eased the fears.
“We still think a direct attack on Iran’s oil facilities is the least likely of Israel’s retaliation options.”
Fed Bets
In the broader market, investors were reassessing the outlook for the path of the Fed’s easing cycle after Friday’s blockbuster US jobs report.
Any chance of another 50-basis-point rate cut next month has been erased and traders are pricing in a 12 per cent 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 US Treasury yield above 4 per cent in Asia trade.
The two-year US Treasury yield hovered near its highest level in over a month and last stood at 3.9556 per cent.
“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 US dollar failed to get a further lift on the revised Fed expectations, having already had a strong run last week, in part owing to safe-haven gains linked to Middle East news.
The dollar was on the back foot in early Asia trade, falling 0.35 per cent against the Japanese yen to 147.68, while sterling rose 0.07 per cent to $1.3094.
Against a basket of currencies, the greenback eased 0.1 per cent to 102.38, though it hovered near a seven-week high hit on Friday.
The Chinese yuan played catch up, sliding against the dollar following the US unit’s post job’s report strength.
Elsewhere, spot gold was little changed at $2,645 an ounce.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
First Published: Oct 08 2024 | 9:58 AM IST
