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Tuesday 03:00 BST
What you need to know
- Chinese equities rally cools
- Rising geopolitical concerns weigh on investors
- Oil remains below $80 a barrel
Hot topic
The rally in Chinese equities showed signs of cooling, with analysts raising concerns over the resilience of a suite of measures by Beijing that on Monday prompted the market’s biggest one-day gain since 2015.
The CSI 300 index of major Shanghai and Shenzhen stocks was down 0.2 per cent in early trading on Tuesday, while in Hong Kong the Hang Seng China Enterprises Index of major Chinese blue-chips listed in the city dropped 0.8 per cent.
The declines came a day after the CSI 300 posted its biggest one-day advance in almost three years, spurred by a series of statements late last week and over the weekend by Chinese officials intended to reassure investors.
Robert Carnell, ING economist, expressed concern over the extent of Chinese authorities’ “firepower against any global turn in confidence”. He pointed to a string of geopolitical issues including Donald Trump threatening to pull out of the US-Russia nuclear arms agreement, fallout from the Khashoggi murder, the US-China trade war and political uncertainty in Europe.
“It seems miles away from China, but the European stand-off with Italy over the Italian budget and ongoing stalemate over Brexit could also tinge general market sentiment in a way that could spill over into renewed EM anxiety requiring more support,” Mr Carnell said.
Société Générale added that while Beijing’s efforts to boost confidence — which included speeches by top officials, tax cuts and funding for local governments — were “striking the right tone”, China’s falling current account balance meant more changes will be needed.
“China will increasingly rely on foreign inflows to fund domestic investment and sustain domestic debt dynamics, which makes all the deleveraging reform and the liberalisation process ever more urgent,” said Wei Yao and Michelle Lam, analysts at bank.
Equities
Asia-Pacific stocks were broadly lower following a soft start to the week for equities in Europe and the US.
In Tokyo, the Topix dropped 1.8 per cent with all market segments in negative territory. Sydney’s S&P/ASX 200 was off 0.8 per cent with small gains for some consumer and technology stocks outweighed by declines for other segments. The broader Hang Seng Index in Hong Kong was down 1.2 per cent.
US and European stock markets made a cautious start to the week. In New York, the S&P 500 slipped 0.4 per cent and the pan-European Stoxx 600 index lost the same amount.
Forex and fixed income
Sovereign debt and foreign exchange markets were steadier.
The US dollar index, measuring the greenback against a basket of peers, was unmoved at 96.02. The Japanese yen was 0.1 per cent stronger at ¥112.67 per dollar.
China’s onshore renminbi exchange rate, which moves within a trading band of 2 per cent either side of a daily midpoint set by the People’s Bank of China, was 0.1 per cent weaker at Rmb6.9399 against the dollar. The offshore rate was 0.1 per cent higher at Rmb6.944.
The New Zealand and Australian currencies were each 0.2 per cent lower against the greenback at $0.6544 and $0.7069, respectively.
The 10-year US Treasuries yield, which falls as prices rise, was 1 basis point lower at 3.186 per cent. That on the equivalent Australian note was down 2bps at 2.682 per cent while the 10-year Japanese government bond yield was flat at 0.147 per cent.
Commodities
Oil prices were lower, with international benchmark Brent crude down 0.2 per cent at $79.65 a barrel and US marker West Texas Intermediate down by the same amount, at $69.25.
Gold was 0.2 per cent higher at $1,224 an ounce.
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