China Tech, Yuan Fall as Stimulus Hopes Unanswered: Markets Wrap

(Bloomberg) — Asian stocks fell Monday, led by declines in Chinese tech companies as investors reset expectations for further stimulus from China after a key meeting ended with little detail on a package.

Most Read from Bloomberg

A gauge of the region’s equities dropped 0.7% as benchmarks in mainland China and Hong Kong declined alongside Japanese and South Korean shares. Australian stocks were clear outliers, climbing around 0.6%. European equity futures also fell while US stock and bond markets are closed Monday for a holiday.

Reports covering China’s State Council meeting on Friday, 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 adds to worries over a slowing economy, unnerving 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, JD.com Inc. and Baidu Inc. all tumbling more than 3% to drag the Hang Seng Tech index as much as 2.9% 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 early declines that at one point touched levels not seen since November, while an index of the dollar bounced back after suffering its worst week since January.

Commodity prices also showed signs of weakness with Brent and West Texas Intermediate prices slipping around 1%. Gold was broadly steady.

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 10-year bond yields fell by five basis points while those of New Zealand fell about the same amount 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:

US Juneteenth holiday, Monday
China loan prime rates, Tuesday
US housing starts, Tuesday
Federal Reserve Bank of St. Louis President James Bullard speaks, Tuesday
New York Fed President John Williams speaks, Tuesday
Federal Reserve Chair Jerome Powell delivers semi-annual congressional testimony before the House Financial Services Committee, Wednesday
Federal Reserve Bank of Chicago President Austan Goolsbee speaks, Wednesday
Eurozone consumer confidence, Thursday
Rate decisions in UK, Switzerland, Indonesia, Norway, Mexico, Philippines, Turkey, Thursday
US Conference Board leading index, initial jobless claims, current account, existing home sales, Thursday
Federal Reserve Chair Jerome Powell delivers semi-annual testimony to Congress before the Senate Banking Committee, Thursday
Cleveland Fed’s Loretta Mester speaks, Thursday
Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday
Japan CPI, Friday
UK S&P Global / CIPS UK Manufacturing PMI, Friday
US S&P Global Manufacturing PMI, Friday
Federal Reserve Bank of St. Louis President James Bullard speaks, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 7:05 a.m. London time. The S&P 500 fell 0.4% Friday
Nasdaq 100 futures were little changed. The Nasdaq 100 fell 0.7% Friday
Japan’s Topix fell 0.4%
Australia’s S&P/ASX 200 rose 0.5%
Hong Kong’s Hang Seng fell 1.2%
The Shanghai Composite fell 0.5%
Euro Stoxx 50 futures fell 0.6%