(Bloomberg) — Chinese equities slipped as a reduction in the nation’s mortgage reference rate failed to dispel the gloom surrounding the world’s no. 2 economy. The dollar tracked a rise in US yields.
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Stocks on the mainland and in Hong Kong slipped, while those in Japan reversed early gains. Benchmarks in Australia and South Korea also retreated. Futures for the Nasdaq 100 were lower after US markets were shut Monday for a holiday.
The moves in Chinese equities came after domestic banks cut a key reference rate for mortgages by a record amount, a sign that the nation was ramping up support for the property sector in a bid to revive demand. An index of China developer stocks initially jumped but quickly unwound the bulk of the gains.
The cut to the five-year loan prime rate was a “good gesture from the commercial banks but still now the property problem is not about the mortgage rate,” said Willer Chen, an analyst at Forsyth Barr Asia Ltd. The move may “slightly boost the property demand but I would not expect much.”
Gains in Chinese equities on Monday fell short of expectations in the first session back following the Lunar New Year holiday. A rise in trading volume for several exchange-traded funds in the country offered a clue that state-backed funds were continuing to support the market.
A gauge of global stocks traded around 1% from its peak after the S&P 500 set a fresh record last week, while the region-wide Euro Stoxx 50 hovered near a two-decade high. Further gains for Japanese stocks have placed the Nikkei 225 index within roughly 1% of its 1989 peak.
The Thai baht fell after Prime Minister Srettha Thavisin called for an unscheduled central bank meeting to cut interest rates. The dollar strengthened against most of its Group-of-10 peers. Yields on US Treasuries rose as trading resumed in Asian hours after the market was shut Monday. China’s 10-year bond rose as yields fell following the cut in the loan prime rate.
“Confidence is low right now and there is a need to stabilize it,” Moh Siong Sim, currency strategist for the Bank of Singapore, said on Bloomberg Television regarding China’s latest effort to support the economy. “Monetary policy is being eased, that is likely to exert downward pressure on yields,” for Chinese bonds, he said.
In Australia, BHP Group, the world’s largest miner, reported $6.57 billion in underlying profits, less than consensus estimates, and said demand from top customer China was healthy despite weakness in housing.
In other corporate news, Capital One Financial Corp. agreed to buy Discover Financial Services in a $35 billion all-stock deal that will form the largest US credit card company by loan volume.
Rate-Cut Adjustments
Interest rate expectations remain firmly in focus. Swaps are now pricing about 90 basis points of Federal Reserve rate cuts in 2024 — from more than 150 basis points at the start of February. In Europe, wagers have been whittled down to about 100 basis points, from 150.
“Markets have adjusted to the idea that rate cuts would come later and probably be less important than what was originally priced,” Vincent Juvyns, global market strategist for JPMorgan Asset Management, said on Bloomberg Television. The move upward is also “really driven by decent earnings growth that we have seen during the fourth quarter,” he added.
Earnings from bellwether Nvidia Corp. Wednesday may provide new impetus for equities as investors try to gauge the strength of the global economy. The chip giant has surpassed the market value of Amazon.com Inc on the expectation it will be a big winner from artificial intelligence developments.
Other potential catalysts for markets this week include Fed January meeting minutes to be released Wednesday and Eurozone inflation data due Thursday.
Elsewhere, gold was little changed after edging higher Monday to trade around $2,018 per ounce. West Texas Intermediate, the US oil price, edged higher against the backdrop of ongoing tensions in the Red Sea, a vital trade route.
Some of the key events this week:
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Reserve Bank of Australia Feb. meeting minutes, Tuesday
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China loan prime rates, Tuesday
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BHP Group Ltd earnings, Tuesday
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European Central Bank publishes euro-area indicator of negotiated wage rates, Tuesday
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Rio Tinto Plc earnings, Wednesday
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Eurozone consumer confidence, Wednesday
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Nvidia Corp earnings, Wednesday
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Federal Reserve Jan. meeting minutes, Wednesday
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Atlanta Fed President Raphael Bostic speaks, Wednesday
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Eurozone CPI, PMI, Thursday
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European Central Bank issues account of Jan. 25 meeting, Thursday
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Fed Governor Lisa Cook, Minneapolis Fed President Neel Kashkar speak, Thursday
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China property prices, Friday
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European Central Bank executive board member Isabel Schnabel speaks, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures fell 0.3% as of 1:25 p.m. Tokyo time
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Nasdaq 100 futures fell 0.4%
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Japan’s Topix fell 0.4%
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Australia’s S&P/ASX 200 fell 0.1%
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Hong Kong’s Hang Seng fell 0.3%
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The Shanghai Composite was little changed
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Euro Stoxx 50 futures fell 0.3%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0769
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The Japanese yen fell 0.1% to 150.30 per dollar
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The offshore yuan was little changed at 7.2059 per dollar
Cryptocurrencies
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Bitcoin fell 0.4% to $51,724.51
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Ether fell 1.7% to $2,917.67
Bonds
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The yield on 10-year Treasuries advanced two basis points to 4.30%
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Japan’s 10-year yield was unchanged at 0.725%
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Australia’s 10-year yield advanced one basis point to 4.18%
Commodities
This story was produced with the assistance of Bloomberg Automation.
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