(Nov 8): China’s stock futures slid on Friday as Beijing authorities announced a 10 trillion yuan (US$1.4 trillion or RM6.13 trillion) programme to refinance local government debt as part of policy support measures to boost flagging growth.
The dollar ticked higher and US equity futures were little changed. The yuan weakened as sentiment worsened on whether the steps will be enough to counter the threat of higher tariffs under a second Donald Trump presidency.
“We have so much uncertainty coming from the US tariffs,” said Michelle Lam, a greater China economist at Societe Generale SA in Hong Kong. “We might see some smaller increase in tariffs of around 15% to 20% and that is more reasonable” for the Chinese economy to absorb.
China will raise local governments’ debt ceiling to 35.52 trillion yuan, which will allow them to issue six trillion yuan in additional special bonds over three years to swap hidden debt, the Xinhua News Agency reported on Friday. Authorities later said local governments will be able to tap another total of four trillion yuan in a new special local bond quota over five years for the same purpose.
The moves follow a cross-asset rally on Thursday that was helped by comments from Federal Reserve (Fed) chair Jerome Powell, who pointed to the strength of the US economy and said he doesn’t rule “out or in” a December rate cut. Powell added that the election will have no effect on policy in the near term, and said he would not step aside if asked by Trump.
“Powell & Co reminded investors about the solid economic footing the US continues to stand on,” said Bret Kenwell at eToro. “Powell would not tip his hand on whether the Fed would likely cut rates in December. However, the Fed appears more comfortable with the labour market and the current US economic backdrop than they did a few months ago.”
Fed officials unanimously lowered the federal funds rate by 25 basis points and tweaked language to note “labour market conditions have generally eased”, and repeated “the unemployment rate has moved up but remains low”. The statement removed the reference to “further” inflation progress, noting inflation “has made progress towards the committee’s 2% objective but remains somewhat elevated”.
A Bloomberg gauge of the “Magnificent Seven” US megacaps gained 2.3%. Lyft Inc jumped 23% after the ride-hailing company gave a bullish outlook. A closely watched gauge of banks dropped 2.7% after gaining over 10% in the previous session. JPMorgan Chase & Co slid 4.3% after an analyst downgrade.
Gold trimmed some of its advance from Thursday, while oil headed for a weekly gain.
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 was little changed as of 8.29am London time
- S&P 500 futures were little changed
- Nasdaq 100 futures were little changed
- Futures on the Dow Jones Industrial Average were little changed
- The MSCI Asia Pacific Index rose 0.1%
- The MSCI Emerging Markets Index was little changed
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro fell 0.2% to US$1.0778
- The Japanese yen rose 0.2% to 152.56 per dollar
- The offshore yuan fell 0.4% to 7.1788 per dollar
- The British pound fell 0.3% to US$1.2952
Cryptocurrencies
- Bitcoin was little changed at US$75,981.52
- Ether rose 0.6% to US$2,909.76
Bonds
- The yield on 10-year Treasuries declined one basis point to 4.31%
- Germany’s 10-year yield declined six basis points to 2.39%
- Britain’s 10-year yield declined four basis points to 4.46%
Commodities
- Brent crude fell 1% to US$74.87 a barrel
- Spot gold fell 0.7% to US$2,687.82 an ounce
Uploaded by Tham Yek Lee