SINGAPORE, Oct 9 (Askume) – Chinese stocks fell and commodities dropped on Wednesday as investors lost enthusiasm for China’s economic recovery, while the broader market steadied on hopes the U.S. economy would emerge from recession and support global demand.
The Bank of New Zealand cut interest rates by 50 basis points and issued a pessimistic statement on the economic outlook, causing the dollar to fall by 0.6%.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.6%, while Hong Kong shares rose 2% after recording their biggest fall since 2008 the previous day.
Hong Kong stocks fell on Tuesday, mainland shares declined and commodities including oil and metals declined after China’s National Development and Reform Commission did not give details of a major new stimulus package at a press conference.
The Shanghai Composite Index (.SSEC) and the blue-chip CSI300 Index (.CSI300) both fell about 3% on Wednesday.
Brent crude futures fell 4.6% to $77.79 a barrel overnight. Singapore iron ore found support at $106 after falling 5% on Tuesday.
“This pessimism, while understandable, appears premature and misguided,” Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho Bank, said in a note to clients.
“The fact is that it is not the role of the National Development Council to provide details of fiscal stimulus (or) further monetary policy.”
Japan’s Nikkei (.N225) rose 1% after Bloomberg News reported Canadian retailer Alimentation Couche-Tard (ATD.TO) and convenience store Seven & I Holdings (3382.T) rose.The buyout offer will be extended .
soft landing
US stock index futures were essentially flat in Asia after strong gains in overnight cash trade, with some Fed officials expressing optimism about the potential for a soft landing for the economy through managed interest rates.
John Williams, the influential president of the New York Fed, told the Financial Times last week that September ‘s unexpectedly strong jobs report showed a healthier economy, while a drop in inflation left room for cuts in long-term interest rates.
Traders had been expecting the Fed to cut interest rates by another 50 basis points in November, and there is currently an 88% probability of a rate cut of 25 basis points.
US Treasuries have stabilized overnight after the latest sell-off, leaving the US two-year note yield at 3.96% and the 10-year note yield at 4.01%.
The dollar, supported by rising yields, held steady against the euro at $1.0968 and the yen at $148.25. The Australian dollar weakened slightly to $0.6738 as traders speculated that the Reserve Bank of New Zealand was preparing further interest rate cuts.
The New Zealand dollar traded at $0.6096, near a seven-week low and testing its 200-day moving average.
IG Markets analyst Tony said: “Although no updated forecasts were given and no press conference was held at today’s meeting, the forward guidance in the decision statement appeared to be soft, giving the Federal Reserve Bank of New Zealand a chance to cut interest rates before the end of the year. Wutong has the potential to do so.”
The minutes of the Federal Reserve’s September meeting (a 50 basis point cut in US interest rates) will be released at the end of the meeting, which will also be attended by Fed Chairmen Raphael Bostic, Lori Logan and Mary Mary Daly.
