TLDR:
- China’s lack of detailed fiscal stimulus disappoints investors
- Hong Kong’s Hang Seng Index slumps 9.4%
- European shares fall, with China-sensitive sectors hit hardest
- Oil prices dip after initial surge due to Middle East conflict
- US Treasury yields hover above 4% after strong jobs report
The global financial markets experienced significant fluctuations on Tuesday, October 8, 2024, as investors digested the lack of detailed fiscal stimulus measures from China and ongoing geopolitical tensions in the Middle East.
The day’s events highlighted the interconnectedness of global markets and the impact of major economic powers on worldwide financial sentiment.
China’s CSI300 blue-chip index initially surged 10% as markets reopened after the week-long National Day holiday.
However, the enthusiasm was short-lived as Zheng Shanjie, chairman of China’s economic planner, provided little detail on fresh fiscal stimulus to complement the monetary measures announced two weeks ago. This lack of clarity led to a pullback, with the index closing 5.9% higher.
The disappointment in Chinese markets had a ripple effect across Asia and Europe. Hong Kong’s Hang Seng Index bore the brunt of the letdown, plummeting 9.4% as investors engaged in profit-taking and expressed waning patience.
The sharp decline erased some of the significant gains made during the Chinese holiday period.
European markets felt the impact of China’s uncertain economic outlook. The continent-wide Stoxx 600 index fell 0.9%, with China-sensitive sectors such as mining and luxury goods companies among the hardest hit. Germany’s DAX dropped 0.8%, while Britain’s FTSE 100 declined 1.3%. Companies like Kering SA and Burberry Plc saw their stock prices fall more than 5% as investors reassessed the potential for growth in the Chinese consumer market.
The oil market also reacted to the day’s events. Brent crude futures dipped 1.9% to $79.41 a barrel, retreating from the previous day’s surge above $80.
The initial price jump was attributed to concerns about supply disruptions due to storms in the United States and the escalating conflict in the Middle East.
However, the waning optimism about Chinese economic stimulus tempered oil prices as traders reassessed global demand prospects.
In the United States, the markets were still processing Friday’s surprisingly strong jobs report. The yield on 10-year US Treasury bonds hovered above 4%, reflecting expectations of a more hawkish Federal Reserve stance.
Traders adjusted their predictions, now seeing only a 10% chance of the Fed holding rates in the next meeting and anticipating around 50 basis points of cuts for the remainder of the year.
The US dollar showed mixed performance against major currencies, falling 0.27% against the Japanese yen to 147.78, while the euro gained 0.1% to reach $1.0985.
The ongoing conflict in the Middle East added another layer of complexity to the global financial picture. Recent rocket attacks on Israeli cities and the potential for expanded military operations in Lebanon kept geopolitical tensions high. These events contributed to market uncertainty and influenced investor sentiment across various asset classes.
As the day progressed, market participants continued to monitor developments in China for any signs of additional economic support measures.
Rong Ren Goh, a portfolio manager at Eastspring Investments, noted that markets were likely to consolidate and digest the announcements made so far, which were seen as meaningful but not sufficient to meet the high expectations set by investors.
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