Chinese stocks fall as traders take interest rate cut: Markets Wrap

(Bloomberg) — Chinese stocks fell as a cut in the country's benchmark mortgage lending rate failed to dispel gloom surrounding the world's No. 1 lender. 2 Economy. The dollar followed a rise in US yields.

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Stocks in the mainland and Hong Kong fell, while stocks in Japan erased early gains. Benchmarks in Australia and South Korea also fell. Nasdaq 100 futures were lower after U.S. markets closed for a holiday on Monday.

The moves in Chinese stocks came after domestic banks cut a key benchmark mortgage interest rate by a record amount, a sign that the country was increasing support for the real estate sector to boost demand. An index of Chinese developer stocks initially surged, but quickly gave up most of the gains.

The reduction in the key interest rate for five-year loans was a “good gesture by commercial banks, but the real estate problem is not yet about the mortgage rate,” said Willer Chen, an analyst at Forsyth Barr Asia Ltd. The move could be “marginal.” While it would boost real estate demand, I wouldn’t expect much.”

Chinese stocks' gains on Monday fell short of expectations in the first session after the Lunar New Year. An increase in trading volumes for several exchange-traded funds in the country was an indication that government-backed funds continued to support the market.

A gauge of global stocks traded about 1% from its peak after the S&P 500 set a new record last week, while the regional Euro Stoxx 50 hovered near a two-decade high. Further gains in Japanese stocks have left the Nikkei 225 index only about 1% away from its 1989 peak.

The Thai baht fell after Prime Minister Srettha Thavisin called for an unscheduled central bank meeting to cut interest rates. The dollar gained against most of its Group of 10 peers. U.S. Treasury yields rose as trading resumed in the Asian hours after the market closed on Monday.

The story goes on

In Australia, BHP Group, the world's largest miner, reported underlying profit of $6.57 billion, below consensus estimates, and said demand from key customer China was healthy despite weakness in housing.

In other corporate news, Capital One Financial Corp. agreed to buy Discover Financial Services in a $35 billion all-stock deal that will create the largest U.S. credit card company by loan volume.

Interest rate reduction adjustments

Interest rate expectations remain firmly in focus. Swaps now price in about 90 basis points of Federal Reserve rate cuts in 2024, up from more than 150 basis points in early February. In Europe, stakes were reduced from 150 to around 100 basis points.

“Markets have gotten used to the idea that rate cuts would come later and probably be less significant than initially priced in,” Vincent Juvyns, global market strategist at JPMorgan Asset Management, said on Bloomberg Television. The upward trend was also “primarily due to the decent earnings growth we saw in the fourth quarter,” he added.

The results of the leading company Nvidia Corp. on Wednesday could provide fresh impetus to stocks as investors try to gauge the strength of the global economy. The chip giant has surpassed Amazon.com Inc.'s market value as it expects it to be a big winner from developments in artificial intelligence.

Other potential catalysts for markets this week include minutes from the Fed's January meeting due out on Wednesday and Eurozone inflation data due on Thursday.

Gold prices were otherwise little changed after rising slightly on Monday to trade at around $2,018 an ounce. The US West Texas Intermediate oil price rose slightly amid ongoing tensions in the Red Sea, a key trade route.

Some of this week's key events:

• Reserve Bank of Australia February Tuesday Meeting Minutes

• Key interest rates for Chinese loans, Tuesday

• BHP Group Ltd results, Tuesday

• The European Central Bank will publish an indicator for negotiated wages for the euro area on Tuesday

• Rio Tinto Plc results Wednesday

• Eurozone consumer confidence, Wednesday

• Nvidia Corp. earnings Wednesday

• January Federal Reserve meeting minutes, Wednesday

• Atlanta Fed President Raphael Bostic speaks on Wednesday

• CPI, Eurozone PMI, Thursday

• The European Central Bank will publish the report of its January 25 meeting on Thursday

• Fed Governor Lisa Cook and Minneapolis Fed President Neel Kashkar speak Thursday

• Property prices in China, Friday

• Isabel Schnabel, board member of the European Central Bank, speaks on Friday

Some of the key moves in the markets:

Shares

• S&P 500 futures fell 0.3% at 12:28 p.m. Tokyo time

• Nasdaq 100 futures fell 0.4%

• Japan's Topix fell 0.2%

• Australia's S&P/ASX 200 fell 0.2%

• Hong Kong's Hang Seng fell 0.2%

• The Shanghai Composite has hardly been changed

• Euro Stoxx 50 futures fell 0.3%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro fell 0.1% to $1.0767

• The Japanese yen fell 0.1% to 150.29 per dollar

• The offshore yuan was little changed at 7.2078 per dollar

Cryptocurrencies

• Bitcoin fell 0.5% to $51,660.1

• Ether fell 1.7% to $2,918.18

Tie up

• The 10-year Treasury yield rose two basis points to 4.30%

• Japan's 10-year yield rose one basis point to 0.740%

• Australia's 10-year yield rose one basis point to 4.18%

raw materials

This story was produced with support from Bloomberg Automation.

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