Asian stocks are waiting for the reaction of the Chinese markets to the sparse economic stimulus promises

By Rae Wee

SINGAPORE (Reuters) – Asian stocks were little moved in early holiday trading on Monday, as investors were nervous about how mainland Chinese markets would react to the government’s broad but thinly worded stimulus promises over the weekend.

Finance Minister Lan Foan vowed to “significantly increase” debt but left investors guessing about the overall size of the stimulus package, a crucial detail needed to gauge the longevity of a stock market rally.

Chinese stocks have been on the rise since the government late last month announced its most aggressive stimulus measures since the pandemic, although some of that rally has since lost momentum as investors await more details on support measures.

“We head into the weekend looking forward to the announcement of an explicit fiscal stimulus plan for China at the MOF briefing on Saturday. However, the fact that this has not been the case risks the market reacting with disappointment earlier this week,” said Ray Attrill, head of foreign exchange strategy at National Australia Bank.

“Uncertainty over the overall extent of fiscal easing and the extent to which there will be direct aid to consumers will keep markets on edge.”

MSCI’s broadest index of Asia-Pacific shares outside Japan was last up 0.12%. Last week it fell 1.7%.

Trading in Asia was thinned out on Monday due to the holiday in Japan.

U.S. stock futures, meanwhile, fell slightly, with S&P 500 futures losing 0.05% while Nasdaq futures lost 0.1%.

EUROSTOXX 50 futures and FTSE futures also fell 0.1% each.

An unexpected weakening in consumer inflation in September, while producer price deflation deepened, also weighed on China’s growth outlook, data showed on Sunday, increasing pressure for further stimulus measures.

Reflecting the weekend’s disappointment, the offshore yuan fell 0.2% to 7.0842 per dollar in early Monday trading.

The Australian dollar, often used as a liquid indicator of the onshore yuan, fell 0.15% to $0.6741.

Still, the latest string of stimulus packages prompted analysts at Goldman Sachs to raise their real gross domestic product forecast for China this year to 4.9% from 4.7%.

“While we have improved our cyclical view due to more vigorous and coordinated stimulus measures in China, our structural view of China’s growth has not changed,” the analysts wrote in a note to clients.

“The ‘3D’ challenges – worsening demographics, a multi-year deleveraging trend and the push to de-risk the global supply chain – are unlikely to be reversed by the latest round of policy easing.”

China’s third-quarter GDP data is due on Friday.

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Elsewhere, currency moves were largely subdued, with the U.S. dollar continuing to receive support from reduced bets on an outsized Federal Reserve interest rate cut next month.

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

Traders have priced out any chance of a 50 basis point Fed rate cut in November after data last week showed consumer prices rose slightly more than expected in September and recent economic news also underscored the strength of the labor market.

In commodities, oil prices fell more than $1 a barrel on Monday as disappointing inflation data and uncertainty over China’s stimulus plans fueled concerns about demand. [O/R]

Brent crude futures were last down 1.39% at $77.95 a barrel, while U.S. West Texas Intermediate crude futures fell 1.4% to $74.50.

Spot gold fell 0.35% to $2,646.63 an ounce. [GOL/]

(Reporting by Rae Wee; Editing by Christopher Cushing)