Stimulus Expectations in China Lead to Mixed Market Reactions

Asian stock markets showed little movement on Monday in a holiday-thinned trading environment, while investors nervously awaited the reactions of mainland China markets to recent government economic stimulus announcements. Despite broad promises made by Finance Minister Lan Foan, the exact scale of the stimulus remains unclear, which is crucial for the sustainability of a potential stock market rally. Since the announcement of the most aggressive stimulus since the pandemic at the end of last month, Chinese stocks have experienced an upswing. However, some momentum has waned as investors await further details on the support measures. Market observers such as Ray Attrill from the National Australia Bank expressed concern that the lack of concrete announcements at the start of the week could lead to disappointments. The MSCI broad index for Asia-Pacific stocks outside Japan was recently up 0.12%, after falling 1.7% the previous week. In Asia, trading was limited on Monday due to a holiday in Japan, while U.S. stock futures slightly declined. The unexpected slowdown in consumer price inflation and the deepening deflation in producer prices in China in September further weighed on the country's growth prospects and led to a decline in the offshore yuan. Nevertheless, analysts from Goldman Sachs predicted that China's GDP would rise by 4.9% this year, instead of the previously forecasted 4.7%, due to the recent stimulus efforts. However, structural challenges persist. Global currency movements largely remained subdued, while the U.S. dollar found support from reduced expectations of drastic interest rate cuts by the Federal Reserve next month. Oil prices fell by more than one U.S. dollar per barrel due to uncertain demand prospects in China.