Asian Stock Markets in a Dilemma: Stimulus Expectations and Interest Rate Adjustments

On Friday, Asian stock markets were mixed, impacted by declining Chinese stocks ahead of a highly anticipated briefing on the upcoming stimulus plan over the weekend. Meanwhile, U.S. futures rose, and oil prices fell. In China, stock markets recorded losses during morning trading. The Shanghai Composite fell by 1.6% to 3,249.14 points, and the CSI 300 Index, which tracks the top 300 stocks on the Shanghai and Shenzhen exchanges, dropped 1.9%. In Hong Kong, markets remained closed due to a holiday, with the index having suffered a decline of over 9% on Tuesday—the most significant loss since the global financial crisis in 2008. Market interest focused on the upcoming briefing by the Chinese Ministry of Finance, which is expected to introduce new fiscal stimulus plans tomorrow. This week, details of the economic stimulus from Beijing disappointed markets, as many had hoped for fiscal measures similar to the September-announced steps to revive the troubled real estate market. Meanwhile, South Korea’s central bank cut its key interest rate by 25 basis points to 3.25%, signaling the start of a loosening cycle to foster economic growth. This is the first rate cut by the Bank of Korea since 2020, following a contraction in GDP in the second quarter and a September inflation rate that was below the central bank's 2% target. In the U.S., stock markets slightly declined following reports showing a somewhat higher-than-expected inflation last month. The S&P 500 dipped 0.2% to 5,780.05 points, the Dow Jones Industrial Average fell 0.1% to 42,454.12 after hitting an all-time high the previous day. The Nasdaq Composite edged down 0.1% to 18,282.05. In the bond market, Treasury yields reacted with movement after the release of economic data, sparking discussions about the potential actual implications for the Fed. The 10-year Treasury yield held at 4.07%, while the two-year Treasury yield fell to 3.96%. In the energy market, the U.S. benchmark crude oil price lost 19 cents, trading at $75.66 per barrel, while Brent crude fell by 27 cents to $79.13 per barrel. In the currency markets, the dollar slightly rose against the Japanese yen, and the euro edged up slightly against the dollar.