Stocks slide as China stimulus disappoints, bitcoin extends rally

TOKYO: Hong Kong stocks led declines in Asia on Monday after Beijing’s latest stimulus fell short of investor expectations, overshadowing Wall Street’s record highs from Friday and futures pointing to further strength at the reopen.

Bitcoin climbed to an all-time high as Donald Trump’s victory in the US presidential election along with pro-crypto candidates being voted to Congress spurred expectations of a light-handed regulatory environment.

The dollar traded not far from last week’s four-month peak versus major peers as traders prepared for a key reading of US consumer inflation this week, as well as a parade of Federal Reserve speakers, including chair Jerome Powell on Thursday.

Hong Kong’s Hang Seng tumbled 2.5% as of 0200 GMT, with a sub-index of mainland Chinese property shares tumbling 3.9%. Chinese blue chips weakened 0.3%.

Japan’s Nikkei fell 0.3%. South Korea’s Kospi lost 0.9% and Taiwan’s benchmark slipped 0.7%.

Australia’s share benchmark declined 0.4%, weighed down by commodity stocks, after oil and industrial metals weakened.

On Friday, after Chinese markets had closed, the National People’s Congress Standing Committee unveiled a 10 trillion yuan (US$1.39 trillion) debt package to ease local government financing strains and stabilise flagging economic growth.

However, the stimulus steps lacked the direct injection of money into the economy that some investors had hoped to see, particularly amid the threat of massive tariffs under the incoming Trump administration.

“It may be disappointing for those who were expecting the NPC meeting to approve a massive fiscal package, but the expectation is unrealistic, because the policy goal is to achieve the GDP growth target and reduce tail risks, not to reflate the economy in any meaningful way,” Macquarie analysts wrote in a note.

“China’s policy will also only respond to its own economic conditions, not the US election result.”

The stimulus disappointment, however, overshadowed what should have been a positive lead from Wall Street, where the S&P 500 broke above 6,000 points for the first time before closing at a record slightly below that level.

S&P 500 futures pointed 0.2% higher on Monday.

The Republican party is edging closer to sweeping both chambers of Congress, taking the Senate on election night and with Edison Research projecting it so far to have 214 seats of the 218 seats needed for control of the House, compared to 205 for Democrats.

Investors expect that Trump’s second term in office will bring equities-boosting tax cuts and looser regulations.

Bitcoin, which has been another prominent “Trump trade”, extended its record run to mark a fresh all-time high of US$81,756.

Trump has pledged to make the United States “the crypto capital of the planet”.

The dollar index, which measures the currency against six major peers, held steady at 105.01 following Friday’s 0.55% climb.

Traders will be watching consumer price data on Wednesday for stickiness that could scupper the chances of an interest rate cut at the next meeting in December.

Markets currently lay about 65% odds for a quarter-point reduction on Dec. 18, according to CME Group’s FedWatch Tool.

The dollar rose 0.5% to 153.39 yen, reversing some of the weakness from Friday, when the pair tracked long-term US Treasury yields lower.

Minutes of the Bank of Japan’s October policy meetings showed officials were divided on how soon they could raise rates again, though market reaction was muted.

US bond markets are closed on Monday for Veterans Day, although Wall Street will be open.

The euro was flat at US$1.0721, sitting not far from a four-month low. Political uncertainty remained a drag as German chancellor Olaf Scholz said he would be willing to call a vote of confidence before Christmas, paving the way for snap elections following the collapse of his governing coalition.

Sterling was little changed at US$1.2922.

Gold declined 0.5% to US$2,669.69 per ounce, dropping back further from last month’s record high of US$2,790.15.

Base metals in Shanghai slipped, with the most-traded December copper contract on the Shanghai Futures Exchange (SHFE) falling 0.9% to 76,570 yuan a ton.

Oil prices extended declines from Friday, when Brent and West Texas Intermediate (WTI) each sank more than 2%. On Monday, Brent futures dropped 0.3% to US$73.68 a barrel, while US WTI futures lost 0.4% to US$70.13 a barrel.