Global stock markets experienced a downturn on Wednesday, despite a rally in China driven by government stimulus measures. The dollar faced pressure, and crude oil prices retreated from recent highs.
European stocks declined by 0.1%, following a nearly 1% gain earlier in the week. Oil and gas shares were the hardest hit, falling by 0.9% amid concerns that China’s stimulus plans may not adequately bolster demand.
In the U.S., Wall Street also anticipated losses, with S&P 500 futures down by 0.2%.
The dollar fell to its lowest level in a month against the euro and reached a two-and-a-half-year low against the British pound. A recent report on U.S. consumer confidence revealed the largest decline in sentiment since August 2021, strengthening expectations for a significant interest rate cut by the Federal Reserve at its upcoming meeting.
According to CME Group’s FedWatch Tool, the likelihood of another 50-basis point rate cut in November increased to over 60%, up from 53% the previous day. “It feels like more is coming on the rate-cutting side,” stated Samy Chaar, chief economist at Lombard Odier in Geneva.
In China, the People’s Bank of China (PBOC) continued its policy easing by cutting medium-term lending rates to banks. This follows a comprehensive stimulus package aimed at bolstering the stock market and supporting the struggling property sector, marking the most extensive measures since the pandemic.
Mainland Chinese blue-chip stocks rose by 1.4%, adding to a 4.3% increase from the previous session. Hong Kong’s Hang Seng Index climbed 0.7%, building on a 4.1% surge from Tuesday.
While the market reacted positively to the stimulus, some analysts caution that the PBOC’s strategies may not address the primary issue hindering economic growth: persistently weak consumer demand. “It’s still short of that necessary to really handle the broad imbalances of the dampening down of domestic demand in China,” Chaar noted.
The initial surge in Chinese stocks briefly uplifted other regional markets, but those gains quickly diminished. MSCI’s broadest index of Asia-Pacific shares outside Japan saw a modest increase of 0.3%. UBS analysts commented, “The debate remains intense on whether there are legs to this rally, though the desk is seeing investors opting to buy or cover shorts first and ask questions later.”
In currency markets, the dollar remained under pressure. Following China’s stimulus announcement, the yuan reached a 16-month high, briefly crossing the key 7-per-dollar mark in offshore trading before settling at 7.0173 per dollar.
The euro gained 0.1% to $1.1189, having previously touched $1.1199, its highest level since August 26. The Japanese yen remained stable at 143.23 per dollar, fluctuating between slight gains and losses.
The British pound peaked at $1.3430, its highest level since March 2022, before retreating slightly to a 0.1% decline. Meanwhile, the Australian dollar reached its highest level since February 2023 at $0.6908, but then fell back to $0.68805 following inflation figures that indicated a cooling trend, potentially paving the way for an earlier rate cut by the Reserve Bank.
“The fall in the underlying measures of inflation is an unexpected and welcomed surprise,” remarked Tony Sycamore, an analyst at brokerage IG.
In commodity markets, gold reached a new record high at $2,670.43. Brent crude futures slipped by 0.5% to $74.80 per barrel, remaining close to Tuesday’s high of $75.87, a level not seen since September 3. U.S. West Texas Intermediate crude also fell by a similar margin, settling at $71.08 per barrel.
Related topic:
