Asian stocks inched slightly higher on Tuesday but struggled to sustain an upbeat rally on Wall Street as concerns about a faltering Chinese economy dampened the market mood.
Data on Tuesday showed China’s exports grew at their fastest since March 2023 in August, suggesting manufacturers are rushing out orders ahead of tariffs expected from a number of trade partners, while imports missed forecasts amid weak domestic demand.
That followed Monday’s inflation figures that pointed to still-fragile domestic demand as producer price deflation worsened, keeping alive calls for further stimulus from Beijing to shore up its economy.
“It is still uncertain if this momentum can last,” said Lynn Song, ING’s chief economist for Greater China, of the better-than-expected trade surplus thanks to export growth.
“Aside from incoming tariffs and the sluggish export orders data of the last few months, if global growth momentum begins to slow too, this could also drag export momentum.”
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), opens new tab was last up a marginal 0.05%, languishing near a one-month low hit in the previous session. Its gains were capped by a slump in Chinese stocks.
China’s CSI300 blue-chip index (.CSI300), opens new tab fell to a seven-month trough and last traded 0.17% lower, while the CSI Tourism Index (.CSI930633), opens new tab tumbled to a record low, underscoring the country’s anaemic consumer demand.
“The stimulus, it clearly has to be more. But unfortunately, it’s been done in very, very small parcels and targeted, and it just seems the economy is just not turning around very quickly,” said Jun Bei Liu, a portfolio manager at Tribeca Investment Partners.
Adding to headwinds for the Chinese economy were escalating trade tensions, after the U.S. House of Representatives on Monday passed a bill that aims to restrict business with China’s WuXi AppTec (603259.SS), opens new tab, BGI and several other biotech companies on national security grounds.
Hong Kong-listed shares of WuXi AppTec and WuXi Biologics (2269.HK), opens new tab were last down 8.6% and 4%, respectively.
The broader Hang Seng Index (.HSI), opens new tab in Hong Kong gained 0.3%, though China’s beleaguered property sector remained a huge drag, with the Hang Seng Mainland Properties Index (.HSMPI), opens new tab tumbling to a record low on Tuesday.
Elsewhere in Asia, Japan’s Nikkei (.N225), opens new tab tacked on 0.23% and looked set to reverse five straight sessions of losses.
FED CUTS
Wall Street had staged an impressive rebound in the previous session, after all three major U.S. stock indexes surged more than 1%, recovering from last week’s selloff.
U.S. futures pared some of their gains on Tuesday, with S&P 500 futures falling 0.13%, while Nasdaq futures slipped 0.32%.
EUROSTOXX 50 futures similarly eased 0.02%. FTSE futures lost 0.43%.
Investors now turn their attention to Wednesday’s U.S. inflation report, which could provide more clarity on whether the Federal Reserve would deliver an outsized 50-basis-point cut when it meets next week.
Expectations are for headline inflation in the United States to have further slowed to an annual 2.6% in August, as compared to July’s 2.9%.
“If the inflation number is any different, or significantly different from expectations, then the number of rate cuts (priced in) will be changed,” said Tribeca’s Liu.
“At the moment, I think the market is reasonably aggressive in pricing quite a lot this side of the year, and so that probably opens up for a bit more… volatility that we have seen in the last couple of weeks.”
Market pricing points to about 110bps of cuts expected from the Fed this year.
In currencies, the U.S. dollar eased slightly, falling 0.05% against the yen to 143.075.
The euro rose 0.06% to $1.1041, while sterling ticked 0.02% higher to $1.30755.
Later on Tuesday, Democrat Kamala Harris and Republican Donald Trump will debate for the first time ahead of the Presidential election on Nov. 5, with the two locked in a tight race for the top job.
Elsewhere, oil prices slipped, with Brent crude futures last down 0.25% to $71.66 a barrel, while U.S. crude eased 0.33% to $68.48 per barrel.
Spot gold fell 0.06% to $2,503.93 an ounce.
