Asian markets opened the week on a mixed note on Monday as investors responded to recent interest rate cuts by China’s central bank, intended to stimulate the country’s slowing economy. Meanwhile, global geopolitical tensions pushed gold prices to a record high.
The People’s Bank of China announced a reduction of two key interest rates to historic lows, aiming to spur spending and help meet the nation’s target of five per cent annual economic growth. The rate cuts come after recent data revealed China’s economy grew at its slowest pace this year, though the figures still exceeded analysts’ expectations.
Zhang Zhiwei, president and chief economist at Pinpoint Asset Management, noted, “The monetary policy has clearly shifted to a more supportive stance since the press conference on September 24. The real interest rate in China is too high.” This shift comes as part of a broader effort to address sluggish indicators, including inflation, investment, and trade, which have been concerning in recent months.
The Chinese government has implemented various measures to revitalize the economy, especially the struggling property sector, including easing home-buying rules and pledging support for equity markets. Despite an initial rally in Chinese and Hong Kong stocks, gains have been inconsistent, with markets reacting to a lack of specific actions or follow-through at recent government briefings.
“Officials are gradually ramping up support to kick-start the economy — but the will-they-won’t-they of announcements has made the process a rollercoaster for markets,” analysts at Moody’s Analytics stated. They believe the recent measures are crucial for reaching the five per cent growth target, though more comprehensive actions are needed to tackle deeper structural issues.
Global Market Reaction Mixed Asian markets reflected mixed reactions. Hong Kong’s Hang Seng Index dropped 1.5% after a strong gain of over three per cent on Friday, while Shanghai’s Composite Index edged up by 0.2%. Other regional markets like Tokyo, Singapore, Manila, Bangkok, and Mumbai also fell, but gains were seen in Sydney, Seoul, Wellington, Taipei, and Jakarta.
European markets were equally mixed as London’s FTSE 100 opened 0.1% higher, while key indexes in Paris and Frankfurt showed slight declines. In contrast, Wall Street provided a positive lead on Friday, with the Dow and S&P 500 hitting new records, buoyed by robust earnings from Netflix and strong sales reports for Apple’s iPhone in China, which boosted the tech sector.
Gold Reaches Record High Amid Geopolitical Tensions Gold prices soared to an all-time high of $2,732.82, driven by heightened geopolitical concerns. The surge followed reports of potential Israeli retaliation against Iran after recent missile attacks, and increased tensions after a Hezbollah drone exploded near Prime Minister Benjamin Netanyahu’s residence. Gold, typically seen as a safe-haven asset, has benefited from these developments, reflecting investor caution.
Oil Prices Steady After Last Week’s Drop Meanwhile, oil prices were relatively stable after a sharp drop of over eight per cent last week. West Texas Intermediate (WTI) rose by 0.5% to $69.55 per barrel, while Brent crude was up 0.3% at $73.28. The oil market’s uncertainty has been compounded by concerns about China’s economic slowdown, as the country remains the world’s largest oil importer.
Key Figures Around 0710 GMT:
- Tokyo – Nikkei 225: DOWN 0.1% at 38,954.60 (close)
- Hong Kong – Hang Seng Index: DOWN 1.5% at 20,497.22
- Shanghai – Composite: UP 0.2% at 3,268.11 (close)
- London – FTSE 100: UP 0.1% at 8,367.21
- Euro/Dollar: DOWN at $1.0853 from $1.0868 on Friday
- Pound/Dollar: DOWN at $1.3031 from $1.3047
- Dollar/Yen: UP at 149.60 yen from 149.45 yen
- Euro/Pound: DOWN at 83.28 pence from 83.30 pence
- West Texas Intermediate: UP 0.5% at $69.55 per barrel
- Brent North Sea Crude: UP 0.3% at $73.28 per barrel
- New York – Dow: UP 0.1% at 43,275.91 (close)
As the earnings season continues, investors are keeping a close watch on upcoming financial reports and geopolitical developments, especially those involving the Middle East, which could significantly influence market trends in the coming days.
