Mar 5 2024: On Tuesday, most Asian stocks experienced a slide, particularly in Hong Kong, as the commencement of China’s week-long annual session of parliament failed to deliver significant stimulus plans to support the struggling economy, disappointing investors.
Equity markets across the region were already under pressure following a pullback from record highs on Wall Street the previous day, amidst indications that the U.S. Federal Reserve is not in a rush to cut interest rates. U.S. stock futures and European futures also pointed lower.
Meanwhile, Bitcoin continued its upward trajectory, reaching a fresh two-year peak of $68,828, edging closer to its all-time high. Gold reached a record closing high of $2,114.99 on Monday and remained around that level.
China’s government maintained last year’s economic growth target of “around 5%” for this year and announced plans to run a budget deficit of 3% of economic output, down from a revised 3.8% last year. Additionally, it unveiled plans to issue 1 trillion yuan ($139 billion) in special ultra-long-term treasury bonds, not included in the budget.
Mainland Chinese stocks reversed early losses, with the blue-chip CSI 300 rising about 0.45% by 0600 GMT, supported by signs of suspected state-backed buying of certain exchange-traded funds. However, other markets in the region remained subdued, with Hong Kong’s Hang Seng deepening earlier declines to 2.67%, and MSCI’s broadest index of Asia-Pacific shares outside Japan losing 1%.
Early announcements from China’s NPC suggest that “large fiscal stimulus is off the table for now,” according to James Kniveton, a senior corporate FX dealer at Convera. He noted that stability remains the overriding factor in Chinese policy-making.
In Japan, the Nikkei erased early losses in the afternoon session but closed slightly down, missing out on a new record high close.
Elsewhere, alternative assets such as cryptocurrencies and bullion gained support, while equities faced selling pressure following hawkish comments from Atlanta Fed President Raphael Bostic, who indicated no urgency to cut interest rates amidst risks of inflation staying above the central bank’s 2% target.
Looking ahead, market participants are awaiting Fed Chair Jerome Powell’s semi-annual testimony to Congress later in the week, as well as a slew of key data on prices and jobs, including Friday’s non-farm payrolls report.
The dollar index, which measures the currency against six major peers, edged up slightly to 103.86, while crude oil prices continued to decline due to demand headwinds, despite the widely expected extension of voluntary output cuts through the middle of the year by the OPEC+ producer group. Brent futures were down to $82.63 a barrel, and U.S. West Texas Intermediate (WTI) eased to $78.49 a barrel.