China’s Sluggish Growth Triggers Decline in Asia-Pacific Markets

Asia-Pacific markets decline as China’s weak stimulus plan and lower-than-expected inflation raise concerns about economic recovery, while U.S. stocks hit record highs.

Asia-Pacific stock markets were on the defensive Monday, with notable declines across major indexes as China’s economic outlook raised fresh concerns. Investors reacted negatively to Beijing’s latest stimulus package and a weaker-than-expected inflation report, suggesting the country’s recovery remains fragile.

China’s Stimulus Plan Fails to Soothe Market Fears

China unveiled a new stimulus plan of 10 trillion yuan ($1.4 trillion) to alleviate local government debt. The initiative, which spans five years, failed to boost market confidence, as analysts questioned whether it would be enough to stimulate growth in the face of persistent economic challenges.

In addition to the stimulus package, China’s inflation rate for October dropped to 0.3%, falling short of the expected 0.4% and marking the lowest inflation rate in four months. This marked the second consecutive monthly decrease in inflation, underscoring the depth of the economic slowdown in the world’s second-largest economy.

Signs of subdued consumer sentiment in China compounded concerns in the market. Despite the launch of Singles’ Day, China’s annual e-commerce shopping event, ING analysts cautioned that consumer spending may remain lackluster, with online shopping growing slower than the broader consumption trend.

Mixed Performance Across Asia-Pacific Markets

The negative sentiment from China spilled over into regional stock markets. Hong Kong’s Hang Seng index plunged nearly 2.5%, while the CSI 300, which tracks significant companies on China’s mainland exchanges, fell by 1%. Japan’s Nikkei 225 dropped 0.4%, while its broader Topix index declined by 0.32%. South Korea’s Kospi dropped 1%, and the Kosdaq slid 1.9%. In Australia, the S&P/ASX 200 ended the day down 0.43%.

China’s Sluggish Growth Triggers Broad Decline in Asia-Pacific Markets

Commodities and Bond Yields Show Mixed Trends

Commodity markets also reflected the cautious mood. Gold slipped 0.64% to $2,676.35 per ounce, while silver dropped 0.18% to $31.70. Brent crude oil and WTI oil saw slight declines, down 0.16% and 0.29%, respectively, with prices hovering around $73.34 and $70.20 per barrel.

In the bond market, yields remained relatively steady. The U.S. 10-year Treasury yield was 4.342%, while the U.K.’s 10-year yield stood at 4.431%. In Europe, Germany’s 10-year yield was at 2.364%.

U.S. Markets End Strong Week, Fueling Optimism Stateside

In contrast to the downbeat mood in Asia, U.S. stock markets closed the week on a high note, with the Dow Jones Industrial Average and S&P 500 achieving record levels. The Dow surged by 259.65 points, closing at 43,988.99, briefly surpassing the 44,000 mark for the first time. The S&P 500 also had a strong performance, finishing at 5,995.54 after trading above 6,000. The Nasdaq Composite saw a modest increase of 0.09%, closing at 19,286.78.

Analysts attributed the positive performance partly to market optimism surrounding former President Donald Trump’s election victory, which fueled broader sentiment in U.S. equities.

Looking Ahead:

On the economic calendar, attention will turn to the upcoming release of the U.K.’s C.B. Leading Index at 1:30 PM GMT, which could provide further insight into market sentiment and economic expectations.

Despite the upbeat performance in the U.S., concerns about China’s economic trajectory continue to weigh on global markets, especially as weak stimulus measures and disappointing inflation data signal potential headwinds for the region’s recovery. Investors will be keeping a close eye on future data and government responses in the coming weeks.

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