(Bloomberg) — Chinese shares fell in early trading, underperforming their Asian peers as caution increases ahead of a key weekend briefing that could shed more light on Beijing’s fiscal stimulus.
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The CSI 300 Index fell as much as 1.6%, reversing Thursday’s gains. Elsewhere in Asia, stocks rose in Japan and South Korea, skirting losses on Wall Street after higher-than-expected core inflation heightened focus on the Federal Reserve’s next move. Shares in Australia fell.
All eyes are on a briefing on Saturday, where China’s finance minister is likely to announce more support measures to revive a slowing economy. Investors and analysts expect Beijing to deploy as much as 2 trillion yuan ($283 billion) in new fiscal stimulus as authorities try to boost growth and restore confidence.
“Government agencies are now expected to feel the pulse of the market before issuing policies,” said Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Plc. “They must prevent expectations from rising and falling to hit market sentiment.”
U.S. stock futures also moved higher after the S&P 500 fell 0.2% on Thursday and the Nasdaq 100 fell 0.1% on Thursday. The markets in Hong Kong are closed on Friday for a public holiday.
Government bonds were steady in early trading in Asia after two-year yields fell six basis points and the 10-year counterpart fell one basis point on Thursday.
Data released Thursday underscored the challenge the Fed faces. Underlying US inflation rose more than expected in September, signaling stalling progress in the battle to bring prices to target. Separate data shows that claims for U.S. unemployment benefits rose last week to the highest level in more than a year.
“The Fed said the final move toward their inflation target will be difficult, and that’s what we’re seeing,” said David Donabedian of CIBC Private Wealth US. November, and likely a similar reduction at the December meeting.”
Swap market prices signaling a possible Fed rate cut next month were little changed. Traders estimate a roughly 80% chance that the Fed will cut by 25 basis points at its November meeting. That compares with a fully priced move ahead of last week’s strong U.S. jobs data.
Fed policymakers John Williams, Austan Goolsbee and Thomas Barkin were unimpressed by the higher-than-expected consumer price index, suggesting officials may continue to cut rates. The outlier was the Atlanta Fed’s Raphael Bostic, who said in an interview with the Wall Street Journal that he had called for an additional quarter-point cut at the Fed’s two remaining 2024 meetings in forecasts released in September.
“A slightly higher-than-expected CPI reading doesn’t mean a new wave of inflation has been unleashed, but the fact that it was accompanied by a jump in weekly jobless claims could increase market uncertainty in the near term,” said Chris Larkin of E .*Trading from Morgan Stanley.
“These weren’t good numbers – but that doesn’t mean they have upended the broader outlook for solid economic growth and moderate inflation,” Larkin added.
In currency markets, the yen was little changed at around 148 per dollar after strengthening on Thursday, while an index of the dollar remained stable. The South Korean won continued to appreciate against the dollar after the Bank of Korea cut its key interest rate by 25 basis points to 3.25%, as expected.
Oil edged lower, paring some of Thursday’s gains, when West Texas Intermediate futures rose 3.6% as traders awaited Israel’s response to Iran’s missile attack.
Investors are also gearing up for third-quarter U.S. earnings results later Friday from JPMorgan Chase & Co., Wells Fargo & Co and Bank of New York Mellon Corp.
Main events this week:
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JPMorgan and Wells Fargo kick off earnings season for the major Wall Street banks on Friday
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U.S. PPI, University of Michigan Consumer Confidence, Friday
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The Fed’s Lorie Logan, Austan Goolsbee and Michelle Bowman will speak Friday
Some of the major moves in the markets:
Stocks
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Futures on the S&P 500 were little changed at 9:53 a.m. Tokyo time
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Japan’s Topix rose 0.3%
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Australia’s S&P/ASX 200 fell 0.2%
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Euro Stoxx 50 futures rose 0.3%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0935
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The Japanese yen was little changed at 148.63 per dollar
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The offshore yuan was little changed at 7.0808 per dollar
Cryptocurrencies
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Bitcoin rose 0.9% to $60,236.38
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Ether rose 0.9% to $2,386.89
Bonds
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The yield on 10-year government bonds was little changed at 4.06%
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The Japanese ten-year yield fell by 1.5 basis points to 0.940%
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The Australian ten-year yield fell by one basis point to 4.21%
Raw materials
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West Texas Intermediate crude fell 0.3% to $75.60 a barrel
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Spot gold rose 0.2% to $2,633.86 an ounce
This story was produced with the help of Bloomberg Automation.
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