🔴 Exclusive webinar: The Secrets of ProPicks AI Success Revealed + November’s List FREEWatch Now

Morning Bid: China caution cools sizzling US optimism

Published 11/10/2024, 04:50 PM
© Reuters. FILE PHOTO: Cars travel past a pedestrian overpass with a display of stock information at the Lujiazui financial district in Shanghai, China, November 7, 2024. REUTERS/Nicoco Chan/File Photo
US500
-
USD/CNY
-
MIWO00000PUS
-

By Jamie McGeever

(Reuters) - A look at the day ahead in Asian markets. 

Investors in Asia have their first chance on Monday (NASDAQ:MNDY) to react to a batch of key economic indicators and news out of China, and should do so in a relatively bullish frame of mind after the record-setting rally on Wall Street on Friday.

The S&P 500 rose above 6,000 points for the first time, continuing its powerful rally following Donald Trump's victory in the U.S. presidential election on Tuesday and the Federal Reserve's interest rate cut on Thursday.

That sealed a weekly gain of almost 5%, the S&P 500's best week since September 2023. This helped lift the MSCI World equity index to a new high on Friday, too.

It is worth recapping how monumental last week was for world markets - the U.S. election and Fed rate cut super-charged risk appetite and the dollar, while investors also navigated a UK rate cut and the collapse of the German government.

The news flow from China was potentially no less significant for investors, although the outlook is not quite as uniformly bullish for local or risk assets. 

China unveiled a 10 trillion yuan ($1.4 trillion) debt package to ease local government financing strains and stabilize flagging economic growth. But this will disappoint investors, who had built up hopes for something special to pre-empt another round of fractious Sino-U.S. tensions and trade barriers.

And on Saturday, official figures showed that inflation in China remains weak, an indication that the economy's revival and path to reflation will be slow and long. 

Producer prices in October slid 2.9% on the year - deeper than the 2.8% fall in September, below an expected 2.5% decline, and the biggest drop in 11 months. Annual consumer price inflation slowed to 0.3% from 0.4%, the slowest in four months.

While investor sentiment globally looks strong, the optimism that exploded around China in the wake of Beijing's wave of stimulus measures in September is fading. Mainland China saw net outflows for the fourth consecutive week, according to Goldman Sachs. 

SocGen analysts advise caution on China, noting that the risk of higher U.S. tariffs on China and other parts of Asia is very real, implying lower growth in Asia and a stronger dollar against Asian currencies. 

They now expect USD/CNY to peak at 7.40 in the second quarter of next year, arguing that China's stimulus measures may not fully compensate for the increased tariff risk. 

The dollar is certainly on a tear. It clocked its sixth weekly gain in a row last week against a basket of major currencies, something not seen since August-September 2023.

Here are key developments that could provide more direction to markets on Monday:

- Japan trade and current account (September)

© Reuters. FILE PHOTO: Cars travel past a pedestrian overpass with a display of stock information at the Lujiazui financial district in Shanghai, China, November 7, 2024. REUTERS/Nicoco Chan/File Photo

- Japan money supply (October)

- Japan corporate earnings

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.