(Bloomberg) — Asian stocks fell in a decline led by Chinese tech companies as investors reset expectations for a stimulus from China after a key meeting Friday ended with little detail on a package.
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A gauge of the region’s equities dropped 0.9% as benchmarks in mainland China and Hong Kong declined alongside Japanese and South Korean shares. Australian stocks were clear outliers, climbing around 0.6%. US stock and bond markets are closed Monday for a holiday.
Reports covering China’s State Council meeting chaired by Premier Li Qiang were light on details about any potential stimulus or timing. Instead, media stated China must adopt “more forceful” measures and respond in a timely manner to support the economic recovery.
The lack of tangible evidence for support appears to unnerve investors who had bid up Chinese equities last week in the hope of a sweeping package that would support infrastructure and the ailing property market.
Instead, Goldman Sachs Group Inc. cut its forecast for Chinese growth, citing limited options to boost stimulus. Support for property would likely be targeted and moderate, economists for the bank said.
“Government policy expectations were overdone,” said Steven Leung, executive director of UOB Kay Hian in Hong Kong, who attributed the unfounded optimism as a key driver behind the selloff in Chinese stocks Monday.
Chinese tech platforms were among the hardest hit companies with Alibaba Group Holding Ltd, Meituan and Baidu Inc. all tumbling around 4% to drag the Hang Seng Tech index as much as 2.7% lower.
The offshore yuan fell, while the Australian dollar reversed an early gain to fall alongside the New Zealand dollar. The yen traded flat after reversing an early decline that at one point touched levels not seen since November last year. An index of the dollar bounced back Monday after suffering its worst week since January.
China is set to cut its one and five year loan prime rates in decisions expected Tuesday, according to economist forecasts, after the country reduced a key lending rate last week.
“These small monetary tweakings of 10 basis points here and there are not enough to rebound the Chinese economy,” Nupur Gupta, a portfolio manager at Eastspring Investments said in an interview with Bloomberg Television. “But they do give a positive signal to the market,” she added.
The visit by US Secretary of State Antony Blinken to Beijing in which he held “candid” talks with his Chinese counterpart also heightened the focus on China on Monday.
Elsewhere, chipmaker stocks were also under pressure. Samsung and SK Hynix fell following a decline for US-traded Micron Technologies on Friday after it warned that about half of its sales tied to China-headquartered clients may be affected by a Chinese cybersecurity probe.
Australian and New Zealand 10-year bond yields fell by four basis points after Treasury yields climbed Friday.
Fed Chair Jerome Powell will give his semi-annual report to Congress on Wednesday. Federal Reserve Bank of St. Louis President James Bullard and his counterparts in New York and Chicago are all set to speak in the week ahead.
The Fed kept interest rates unchanged last week but warned of more tightening ahead. In the past, pausing rate hikes for three months after such a run of interest rate hikes has boosted stock prices.
“We might just have a chance of avoiding recession,” said Loreen Gilbert, chief executive officer for Wealthwise Financial said in an interview with Bloomberg Television. “The markets are already expecting another rate hike and our baseline is that might not even happen.”
Other key central bank developments in the week ahead include policy meetings in Turkey, the UK and Switzerland.
Key events this week:
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US Juneteenth holiday, Monday
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China loan prime rates, Tuesday
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US housing starts, Tuesday
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Federal Reserve Bank of St. Louis President James Bullard speaks, Tuesday
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New York Fed President John Williams speaks, Tuesday
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Federal Reserve Chair Jerome Powell delivers semi-annual congressional testimony before the House Financial Services Committee, Wednesday
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Federal Reserve Bank of Chicago President Austan Goolsbee speaks, Wednesday
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Eurozone consumer confidence, Thursday
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Rate decisions in UK, Switzerland, Indonesia, Norway, Mexico, Philippines, Turkey, Thursday
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US Conference Board leading index, initial jobless claims, current account, existing home sales, Thursday
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Federal Reserve Chair Jerome Powell delivers semi-annual testimony to Congress before the Senate Banking Committee, Thursday
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Cleveland Fed’s Loretta Mester speaks, Thursday
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Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday
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Japan CPI, Friday
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UK S&P Global / CIPS UK Manufacturing PMI, Friday
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US S&P Global Manufacturing PMI, Friday
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Federal Reserve Bank of St. Louis President James Bullard speaks, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures fell 0.2% as of 1:12 p.m. Tokyo time. The S&P 500 fell 0.4%
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Nasdaq 100 futures were little changed. The Nasdaq 100 fell 0.7%
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Japan’s Topix fell 0.8%
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Australia’s S&P/ASX 200 rose 0.6%
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Hong Kong’s Hang Seng fell 1.6%
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The Shanghai Composite fell 0.5%
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Euro Stoxx 50 futures fell 0.7%
Currencies
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The Bloomberg Dollar Spot Index rose 0.1%
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The euro was little changed at $1.0935
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The Japanese yen rose 0.2% to 141.60 per dollar
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The offshore yuan fell 0.4% to 7.1531 per dollar
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The Australian dollar fell 0.5% to $0.6838
Cryptocurrencies
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Bitcoin fell 0.2% to $26,421.03
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Ether fell 0.3% to $1,724.66
Bonds
Commodities
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West Texas Intermediate crude fell 1.5% to $70.71 a barrel
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Spot gold fell 0.1% to $1,955.05 an ounce
This story was produced with the assistance of Bloomberg Automation.
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