(Bloomberg) — Chinese stocks dropped, dragging down Asian equities, following worse-than-expected inflation data on the weekend and some disappointment over a Politburo meeting.
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Stocks in mainland China declined almost 1%, pushing a regional gauge lower for a second session, after data published Saturday showed consumer prices fell at the steepest pace in three years. Some market participants may be disappointed as China’s regulators dropped the “forceful” wording when describing monetary policy for 2024, according to Bloomberg Intelligence. The dollar rose against most of its major peers.
Moves were mixed in the rest of the region as traders looked ahead to an event heavy week that features US inflation data on Tuesday, a Federal Reserve policy decision Wednesday and retail sales numbers Thursday.
“China’s deflation situation is deepening with the triple whammy from domestic food prices, international oil price corrections and weak domestic demand,” Citigroup economists led by Xinyu Ji wrote in a note to clients. “There is no time for policy hesitation to prevent a vicious loop between deflation, confidence and activities” and there’s rising risk of an imminent reserve-requirement ratio and/or rate cuts, they wrote.
China’s top leaders pledged to strengthen fiscal support and emphasized the importance of economic “progress” at a meeting Friday, the official Xinhua News Agency reported. The Politburo also declared that monetary policy should be flexible, appropriate, targeted and effective, with the previous wording “forceful” dropped from the statement.
“The tone for the monetary policy and fiscal policy is more conservative than before,” said Willer Chen, senior analyst at Forsyth Barr Asia Ltd. “This means that the level of loosening from monetary policy in 2024 may not be as big as 2023.”
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Elsewhere, Japan’s benchmark stock indexes jumped at least 1% as Australian shares also gained following a rally in US equities Friday. Indexes in Hong Kong slid over 2% while futures contracts for US…
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