Worries about the US Federal Reserve’s tightening cycle and China’s Covid cases saw Asian markets cut some gains after hitting eight-week highs on Monday.
Chinese property stocks and bonds soared on Monday as markets cheered Beijing’s “most comprehensive” support measures aimed at boosting liquidity in the real estate sector in its latest attempt to stabilise a key pillar for the world’s second-largest economy.
China’s real estate index jumped 3.5% in response, while Hong Kong’s property index surged 13.5%.
Blue chips rose 1%, helped by a slew of changes to China’s Covid curbs, even as the country reported more cases over the weekend.
“It’s hard to see how the case news is anything but negative from an economic standpoint, but it’s the symbolism of the movement, however small, in the zero-Covid strategy that markets are happily latching onto,” said Ray Attrill, head of FX strategy at National Australia Bank.
MSCI’s index of emerging market stocks rose as much as 1.3%.
Japan’s Nikkei gave up early gains to end the day lower by 1.06%. Shares in SoftBank Group Corp plunged after the company reported a heavy loss at its Vision Fund investment arm for a third consecutive quarter.
The shares sank 13% in early afternoon trade – heading for their biggest one-day loss in more than two and a half years.
Indian shares also closed lower on Monday, following the previous session’s rally, even as the country’s annual wholesale price-based inflation (WPI) eased in October to 8.4% year-on-year, the lowest since March 2021.
Shares of Life Insurance Corporation of India rose as much as 9.1%, however, after reporting profit after tax surged to 159.52 billion Indian rupees ($1.98 billion) in the July-September quarter, up more than 1000% from a year earlier.
China remains in focus
The support for China’s property sector, which consumes a vast amount of metals, boosted copper towards a five-month high. Three-month copper on the London Metal Exchange (LME) rose 0.3% at $8,519 a tonne by 0725 GMT.
US President Joe Biden met Chinese leader Xi Jinping in person on Monday for the first time since taking office, with US concerns over Taiwan, Russia’s war in Ukraine and North Korea’s nuclear ambitions on top of his agenda.
The news on Covid rules had stoked a short-covering bounce in the yuan, which added to broad pressure on the dollar as yields dived.
China’s onshore yuan rose to a near two-month high against the dollar, after the central bank lifted its official guidance fixing by the most since 2005 when Beijing abandoned the currency’s decade-old peg against the greenback.
Elsewhere, the Japanese yen weakened 0.9% versus the greenback to 140 per dollar, while the euro was down 0.2% at $1.0324.
The risk-sensitive Australian and New Zealand dollars slipped, giving up some gains made after China moderated its zero Covid strategy.
Cautious investor sentiment
Investor sentiment remained cautious after a top US central banker warned investors against getting carried away over one inflation number.
Governor Christopher Waller said the markets were well ahead of themselves on just one inflation print, though he did concede the Fed could now start thinking about hiking at a slower pace. He added it would take a string of soft reports for the bank to take its foot off the brakes.
European shares edged higher on Monday, as media stocks were boosted by Britain’s Informa, although caution prevailed after a top Federal Reserve policymaker warned that the US central bank would not “soften” its fight against inflation.
Oil reverses gains
Oil prices pared earlier gains and fell on Monday, dragged down by a firmer US dollar and record high coronavirus cases in major Chinese cities that dashed hopes of the reopening of the economy of the world’s biggest crude importer.
Contracts for Brent crude and US West Texas Intermediate had edged up nearly 1% earlier in the session but later reversed their trajectory and headed lower.
Tokyo – Nikkei 225 < DOWN 1.06% at 27,963.47 (close)
Hong Kong – Hang Seng Index > UP 1.7% at 17,619.71 (close)
Shanghai – Composite < DOWN 0.13% at 3,083.40 (close)
London – FTSE 100 > UP 0.4% at 7,346.93 (1215 BST)
New York – Dow > UP 0.1% at 33,747.86 (Friday close)