Equity markets of both mainland China and Hong Kong suffered losses on Monday owing to data that showed China’s economic growth had been slower than expected during the third quarter.
The worrisome figures weighed on regional stocks. However, losses were capped under expectations of receiving support from policymakers.
On the other hand, oil prices reached new multi-year peaks in line with its recent surge owing to energy shortages globally. US crude hit a fresh seven-year high while Brent hit a three-year high.
China’s gross domestic product (GDP) rose by 4.9% in July-September compared to the prior year. This marks the slowest pace in China’s GDP since the third quarter of 2020. As the country deals with power shortages, sporadic COVID-19 outbreaks, and supply bottlenecks along with issues in the property sector.
Chinese blue chips dropped by 1.53% while the Hong Kong benchmark dropped 0.56%. It must be noted that most of the losses occurred right after the bell, before the release of the data.
Head of Asia Economics, Oxford Economics Louis Kuijs said, “In response to the ugly growth numbers we expect in the coming months, we think policymakers will take more steps to shore up growth. We think the electricity shortages and production cuts will become less of a problem later in Q4. In line with our expectation, senior policymakers have started to stress growth and we expect them to start calling for the pursuit of climate targets on a more measured timeline.”
The below-expectations statistics weighed on regional benchmarks. MSCI’s broadest index of Asia-Pacific shares outside Japan saw a drop of 0.2% while Japan’s Nikkei plunged by 0.3%.
The US stock futures and the S&P 500 e-minis remained steady.
The Asian declines come after Last week stocks throughout the world closed in a bullish mood recording their best day in the last five months on Friday owing to strong U.S. corporate earnings reports. The earnings data uplifted sentiments surrounding the economy, even though firm oil prices kept driving inflation risks and lifted government bond yields.
Chief economist at AMP Shane Oliver said that investors continue to be concerned over inflation, driven by supply chain issues. He gave the example of New Zealand, which on Monday recorded an increase of a 2.2% in its consumer price index during the third quarter, the fastest pace in over a decade.
Oliver added, “But in the last two weeks share markets have been shrugging off most things”.
Analysts at CBA believe that as inflation pressure mounts, the US rates are expected to rise, supporting the greenback which “has further upside on our view”.
The yield on benchmark 10-year Treasury notes also increased as high as 1.5930% on Monday, approaching the four-month high of 1.6310% hit early Tuesday, before a shake later in the week.
The CBA analysts said that the pound could gain on the dollar this week as “UK economic and inflation dynamics support the upward shift to the UK interest rates”.
During early trading on Monday, the majority of the currencies were quiet. The greenback saw a slight change against a basket of its peers at 93.992, off its one-year high of 94.563 hit last Monday, while the yen hovered near its almost three-year low against the dollar.
US crude rose by 1.28% at $83.33 a barrel, while Brent crude soared 0.85% higher at $85.58 per barrel.
Gold went up by 0.14% at $1,769.60 an ounce, following a drop of 1.5% on Friday on higher US bond yields and a surge in US retail sales.
Bitcoin has been on its way to its all-time high, reaching $62,000 which is not far from April’s record of $64,895, having gained last week under the pretext of regulators allowing a futures-based exchange-traded fund.