TOKYO, March 5 — Most Asian stocks slid today, led by sharp declines in Hong Kong as the start of China’s week-long annual session of parliament disappointed investors with its lack of big ticket stimulus plans to prop up the struggling economy.
Equity markets in the region were already on the back foot following a retreat from record highs on Wall Street yesterday, amid signs the US Federal Reserve is in no hurry to cut interest rates. US stock futures also pointed lower, as did European futures.
Bitcoin continued its ascent to a fresh two-year peak of US$68,828 that put it within spitting distance of an all-time high. Gold marked a record closing high of US$2,114.99 yesterday and continued to hover around that level.
The Chinese government retained last year’s target for economic growth of “around 5 per cent” for this year, and announced plans to run a budget deficit of 3 per cent of economic output, down from a revised 3.8 per cent last year.
It also unveiled plans to issue 1 trillion yuan (RM656.7 trillion) in special ultra-long term treasury bonds, which are not included in the budget.
Mainland stocks reversed early losses with the blue-chip CSI 300 up about 0.45 per cent by 0600 GMT, amid signs of suspected state-backed buying of some exchange-traded funds.
However, that failed to lift other markets in the region with Hong Kong’s Hang Seng deepening earlier declines to 2.67 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan lost 1 per cent.
The early announcements from China’s NPC suggest “large fiscal stimulus is off the table for now,” said James Kniveton, senior corporate FX dealer at Convera.
“Stability is still the overriding factor in Chinese policy making, and the announcements so far seem to conform to that philosophy.”
Japan’s Nikkei erased early losses in the afternoon session, but ended the day slightly down to miss out on a new record high close.
Meanwhile, alternative assets such as cryptocurrencies and bullion have been supported and equities sold following hawkish comments from Atlanta Fed President Raphael Bostic that there was no urgency to cut interest rates amid risks inflation stays above the central bank’s 2 per cent target.
Those remarks frayed nerves ahead of Fed Chair Jerome Powell’s semi-annual testimony to Congress later in the week, as well as a deluge of key data on prices and jobs, culminating with Friday’s non-farm payrolls report.
“There are signs of slight irrational exuberance and maybe a squeeze of long-suffering shorts in some markets,” particularly bitcoin and gold, said Kyle Rodda, senior markets analyst at Capital.com.
“The moves have come despite only a minor shift in rates market pricing.”
Odds for a US rate reduction by the Fed’s May meeting declined below 22 per cent from 26 per cent a day earlier, according to CME Group’s FedWatch Tool.
The dollar index, which measures the currency against six major peers, edged up 0.02 per cent to 103.86. It eased 0.07 per cent yesterday, as declines against rivals like the euro and sterling overshadowed gains against the yen.
The euro was flat at US$1.0852, after advancing 0.14 per cent yesterday, with the European Central Bank due to set policy on Thursday. Traders are convinced it will keep rates steady at the meeting, but futures imply an 88 per cent probability that cuts will start in June.
Sterling was little changed at US$1.2685, following a 0.3 per cent rise at the start of the week, in the run-up to tomorrow’s UK budget. Finance Minister Jeremy Hunt has been trying to dampen speculation about big pre-election tax cuts.
Against the yen, the dollar was steady at 150.49, following yesterday’s 0.27 per cent climb. The currency pair tends to be extremely sensitive to moves in long-term US bonds, and benchmark 10-year Treasury yields bounced from 2-1/2-week lows overnight to sit at 4.21 per cent.
Elsewhere, crude oil continued to tick lower, as demand headwinds counterbalanced a widely expected extension of voluntary output cuts through the middle of the year by the Opec+ producer group.
Brent futures were off 17 cents to US$82.63 a barrel, while US West Texas Intermediate (WTI) eased 25 cents to US$78.49 a barrel. — Reuters
