Asian Stocks Hold Steady Amid Chinese Stimulus Uncertainty

Asian stocks remained mostly unchanged in light holiday trading on Monday, as investors anxiously awaited China’s response to its weekend stimulus promises. The Chinese government, while pledging broad economic support, left out key details, causing uncertainty among market participants.

China’s Economic Stimulus Lacks Detail

China's Minister of Finance, Lan Foan, announced plans to "significantly increase" debt but did not specify the scale of the stimulus package. This omission left investors questioning the longevity of the stock market rally that began following Asian markets and remained mostly unchanged after China’s aggressive stimulus measures were introduced late last month. As a result, momentum in the stock market has waned, with investors anticipating more concrete details.

Ray Attrill, head of FX strategy at National Australia Bank, expressed concerns:

“Markets had anticipated a more explicit fiscal stimulus announcement over the weekend, and the lack of specifics may lead to disappointment this week.”

Asian Markets React Cautiously

The MSCI Asia-Pacific Index excluding Japan was up just 0.12%, recovering slightly after a 1.7% drop last week. Japan's markets were closed for a holiday, leading to reduced trading activity across the region.

In the U.S., S&P 500 futures dipped by 0.05%, while Nasdaq futures dropped 0.1%. European markets followed suit, with EURO STOXX 50 and FTSE futures down 0.1% each.

Inflation Data Puts Pressure on China

Adding to China’s economic concerns, consumer inflation unexpectedly eased in September, and producer price deflation worsened, according to data released on Sunday. This increased pressure on the government to introduce further stimulus to revive economic growth.

Reflecting investor disappointment, the offshore yuan fell 0.2% to 7.0842 per dollar in early Monday trading. Meanwhile, the Australian dollar—often seen as a proxy for the yuan—declined by 0.15% to $0.6741.

Goldman Sachs Raises GDP Forecast

Despite concerns, Goldman Sachs raised its forecast for China’s 2024 GDP growth to 4.9%, up from 4.7%, citing China’s recent stimulus measures.
However, Goldman’s analysts remained cautious, noting that structural challenges—such as deteriorating demographics, debt deleveraging, and global supply chain risks—are unlikely to be resolved by these short-term measures.

U.S. Dollar Stays Strong as Fed Rate Cut Expectations Fade

Currency markets remained relatively quiet, with the U.S. dollar maintaining strength due to diminished expectations of a significant Federal Reserve rate cut in November. Traders are now pricing out the possibility of a 50-basis-point cut, given recent U.S. inflation data and ongoing labor market strength.

Sterling fell 0.18% to $1.3043, while the euro slipped 0.13% to $1.0922.

Oil Prices Dip Amid China Demand Concerns

In commodities, oil prices dropped more than $1 per barrel due to concerns over weaker demand in China. The lack of clarity on stimulus measures and disappointing inflation data contributed to the fall.

• Brent crude was down 1.39% at $77.95 per barrel.

• West Texas Intermediate (WTI) crude fell 1.4% to $74.50 per barrel.

Conclusion

With markets on edge awaiting further clarity on China's stimulus measures and the release of third-quarter GDP data later this week, investors will be closely watching developments. The response from China’s government could dictate the direction of global markets in the days ahead.