Asian stock markets experienced a decline on Monday, with Hong Kong’s Hang Seng index showing the largest drop of over 2%. This downward trend was primarily influenced by China’s recent stimulus package, which fell short of investors’ expectations.
On Friday, China unveiled a significant plan worth 6 trillion yuan (approximately $839 billion) during a session of its national legislature. This long-anticipated stimulus aims to assist local governments in managing their substantial debts as part of a broader effort to stimulate growth in the world’s second-largest economy.
Economic analyst Stephen Innes from SPI Asset Management commented that while the size of the stimulus is considerable, it does not represent the growth acceleration many were hoping for. He explained that the focus of the stimulus appears more centered on addressing systemic financial issues within local governments rather than driving robust economic growth.
In the meantime, data released by China’s National Bureau of Statistics revealed that the inflation rate for October rose by 0.3% compared to the same month last year. This marks a deceleration from September’s inflation rate of 0.4% and is the lowest rate observed in four months.
The Hang Seng index dropped by 2.2%, closing at 20,270.77, and the Shanghai Composite index saw a decrease of 0.4%, settling at 3,437.90.
In Japan, the Nikkei 225 index fell by 0.4% in morning trading, reaching 39,347.79. Australia’s S&P/ASX 200 decreased by 0.5% to 8,252.70, while South Korea’s Kospi index declined by 1% to 2,534.82.
In the U.S., futures were on the rise, but oil prices experienced a drop. The previous Friday, the S&P 500 index increased by 0.4% to 5,995.54, marking its most significant weekly gain since early November 2023, briefly surpassing the 6,000 mark for the first time. The Dow Jones Industrial Average was up by 0.6%, closing at 43,988.99, and the Nasdaq composite added a modest 0.1%, reaching 19,286.78.
Long-term Treasury yields in the bond market decreased. A preliminary report indicated a fourth consecutive month of rising consumer sentiment in the U.S., reaching a six-month high. The University of Michigan’s survey, which was conducted before the recent election, also noted a decline in inflation expectations for the upcoming year—the lowest level since 2020.
The yield on the 10-year Treasury fell to 4.30% on Friday, down from 4.33% the previous day, although it remains significantly above the near 3.60% level observed in mid-September. The increase in Treasury yields has been primarily attributed to the resilience of the U.S. economy, which has exceeded expectations. There is hope that this stability will continue as the Federal Reserve begins cutting interest rates to maintain a robust job market while working to bring inflation close to its 2% target.
Some of the rise in yields has also been linked to remarks made by former President Trump, who has promoted tariff policies and other measures that economists believe could elevate inflation and increase U.S. government debt alongside economic growth. Traders appear to be revising their estimates for the number of rate cuts the Fed might implement next year due to these developments. While lower interest rates could stimulate the economy, they also risk igniting inflation.
In other market movements on Monday, U.S. benchmark crude oil prices fell by 27 cents, trading at $70.11 per barrel in electronic sessions on the New York Mercantile Exchange. International benchmark Brent crude lost 21 cents, settling at $73.66 per barrel.
The U.S. dollar strengthened against the Japanese yen, rising to 153.36 from 152.62 yen, while the euro saw a slight increase to $1.0725, up from $1.0723.