Chinese shares sank Friday at the end of a volatile week as traders prepare for a highly anticipated briefing where it is hoped authorities will outline fresh fiscal stimulus to add to a raft of measures unveiled last month.
The losses came on a mixed day for Asian markets following disappointing US inflation data that further dampened expectations for another bumper interest rate cut next month.
Shanghai lost more than two percent after a week dominated by concerns about a lack of detail on China’s recent batch of economy-boosting measures during a news conference Tuesday.
Chinese and Hong Kong markets have whipsawed over the past few days, having rocketed more than 20 percent in reaction to the raft of support pledges unveiled last month that had a particular emphasis on helping the battered property sector.
Focus is now on Saturday’s briefing at which Finance Minister Lan Fo’an is to set out fiscal policy.
China has come under pressure to unveil a fresh round of stimulus as a string of data have shown the world’s number-two economy continues to struggle since strict Covid rules were lifted in late 2022.
The government has pushed a series of piecemeal measures in that time but observers have warned it needs another “bazooka” similar to that seen during the global financial crisis.
Analysts surveyed by Bloomberg said they saw Beijing deploying as much as two trillion yuan ($283 billion) in support, with some even suggesting more than three trillion yuan.
“The stakes are high — most observers agree that recent stimulus announcements won’t amount to much unless backed up by fiscal support,” said Julian Evans-Pritchard, head of China economics at Capital Economics, in a note.
“Three factors will be key in determining the impact of stimulus: its scale, where it’s channelled, and how soon it’s deployed,” he said.
Wall Street ticked down Thursday after figures showed September US consumer prices rose slightly less than the previous month but a little more than forecast, while the closely watched core reading edged higher.
That followed last Friday’s blockbuster jobs data that led traders to slash bets on a second successive 50-basis-point rate reduction in November.
While the latest inflation news was not as good as hoped, some Federal Reserve officials remained upbeat.
New York Fed president John Williams said that “month to month, there’s wiggles and bumps in the data, but we’ve seen this pretty steady process of inflation moving” downward.
“I expect that that will continue,” he said, adding he thought the bank could continue to bring borrowing costs down.
His Chicago counterpart Austan Goolsbee told CNBC the rate of inflation was clearly moving downwards, while Richmond Fed chief Thomas Barkin concurred it was “definitely headed in the right direction”.
However, Raphael Bostic at the Atlanta Fed said one print did not tell a whole story, but if repeated it could give him reason to consider pausing on rates.
Traders now see a 25-basis-point reduction, having been optimistic for 50 before last week’s jobs report.
“Overall, the print doesn’t change the story of (the) moderating inflation narrative and should keep the Fed on getting policy back to a more neutral setting (wherever that may be),” said Tapas Strickland, head of market economics at National Australia Bank.
But he added that if repeated “it may… challenge where inflation could settle and how quickly it may take to get there”.
After a tepid lead from Wall Street, where the Dow and S&P 500 came off record highs, Asia fluctuated.
Tokyo rose on a weaker yen as investors scale back expectations for US rate cuts, while Wellington, Bangkok, Taipei and Jakarta also edged up.
However, Sydney, Seoul, Singapore, Mumbai and Manila dropped. Hong Kong was closed for a holiday.
London edged down even as data showed the UK economy expanded in August after stagnating for two months. Frankfurt was up and Paris dipped.
Oil dropped more than one percent, having surged more than three percent Thursday after Israel’s defence minister pledged his country would strike Iran in retaliation for last week’s missile attack.
– Key figures around 0710 GMT –
Tokyo – Nikkei 225: UP 0.6 percent at 39,605.80 (close)
Shanghai – Composite: DOWN 2.6 percent at 3,217.74 (close)
London – FTSE 100: DOWN 0.1 percent at 8,228.24
Hong Kong – Hang Seng Index: Closed for holiday
Euro/dollar: UP at $1.0939 from $1.0935 on Thursday
Pound/dollar: DOWN at $1.3051 from $1.3058
Dollar/yen: UP at 148.69 yen from 148.58 yen
Euro/pound: UP at 83.82 pence from 83.73 pence
West Texas Intermediate: DOWN 1.2 percent at $74.98 per barrel
Brent North Sea Crude: DOWN 1.2 percent at $78.43 per barrel
New York – Dow: DOWN 0.1 percent at 42,454.12 (close)
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