China in Focus: Markets Expect Clarity on Economic Stimulus

Asian markets began the week under a subdued star after China's Ministry of Finance failed to meet high expectations during a weekend press conference. The markets also faced additional pressure from a decline in factory prices, which reignited concerns about China's economic situation. At the start of the trading week, the Australian and New Zealand dollars weakened against the US dollar. Meanwhile, US stock futures dropped after the S&P 500 had risen by 0.6% on Friday. Markets in Japan are closed due to a holiday, while trading in Hong Kong resumes after a three-day break. Crude oil prices also registered a decline of over 1%, while gold prices slipped slightly. China’s Finance Minister Lan Fo'an reaffirmed his support for the struggling real estate sector and hinted at a possible increase in national debt, but refrained from providing specific figures. The call for additional fiscal measures is growing louder as consumer and factory price data remain weak. Richard Franulovich from Westpac Banking Corp. expressed disappointment in the absence of new stimulus measures from China but expects a clearer market reaction with the reopening of Chinese markets on Monday. Chris Weston from the Pepperstone Group also emphasized that specific economic revitalization measures are still pending, though the firm commitment to achieving the 5% GDP target could be considered a positive initial step. In the US, the S&P 500 reached a record high of over 5,800 points on Friday, particularly after banks gained ground from higher interest income, led by JPMorgan Chase. As expectations for the Fed's interest rate policy eased, US Treasury yields remained stable: the two-year yield was nearly stagnant, while the ten-year yield rose by four basis points. Solita Marcelli from UBS advised investors to prepare for a lower interest rate environment and to invest in medium-term bonds and high-quality stocks. This week, key economic indicators from China are in focus, while central banks in Thailand, the Philippines, and Indonesia will announce their decisions. Particularly noteworthy is the European Central Bank meeting, where a rate cut of 25 basis points is quite likely.