World shares edged off record highs on Monday as strife in the Middle East fuelled economic uncertainty, just as China shares posted their biggest one-day gain in 16 years thanks to Beijing’s latest raft of stimulus policies.
Continued Israeli strikes across Lebanon added geopolitical uncertainty to the mix, though oil prices were still restrained by the risk of increased supply. [O/R]
U.S. stock futures ticked 0.3% lower , while European stocks fell almost 1% weighed down by profit warnings and poor growth outlooks from the auto sector.
Japan’s Nikkei slumped almost 5% after perceived monetary policy hawk Shigeru Ishiba won a leadership contest to become the country’s prime minister.
That all left MSCI’s world stocks index trading a 0.3% lower on the day and off a record high touched last week.
The exception was China. Government stimulus measures announced last week continued to boost stock markets, with the blue-chip CSI300 closing up 8.5%, its biggest daily gain since 2008 adding to its 25% run-up in the last five trading sessions.
The Shanghai Composite climbed 7.1%, on top of last week’s 13% rally.
Meanwhile, in China brokerages were overwhelmed by a pre-holiday rush of retail clients, jamming up trading systems as investors rotated money out of bonds and deposits into stocks.
“The Chinese stimulus has created some noise but the market may be front-running these first few steps, which might lead to disappointment later if measures don’t continue,” said Matt Tickle, chief investment officer at consultancy Barnett Waddingham.
Tickle said he’d take little comfort on longer term themes until he was certain on what would come next, not only from China’s central bank, but from policymakers around the world.
“It’s central bank watch, yet again,” said Tickle.
The week is packed with major U.S. economic data including a payrolls report that could decide whether the Federal Reserve delivers another outsized rate cut in November.
WALL ST ON A ROLL
The rally in China helped MSCI’s broadest index of Asia-Pacific shares outside Japan firm 0.1%, having surged over 6% last week to a seven-month high.
Wall Street also had a rousing week helped by a benign reading on core U.S. inflation on Friday that left the door open to another half-point rate cut from the Fed.
Futures imply around a 55% chance the Fed will ease by 50 basis points on Nov. 7, though the presidential election two days earlier remains a major unknown.
A host of Fed speakers will have their say this week, led by Chair Jerome Powell later on Monday. Also due are data on job openings and private hiring, along with ISM surveys on manufacturing and services.
In currency markets, the dollar was around 0.2% firmer at 142.49 yen, after sliding 1.8% on Friday from a 146.49 top. [USD/]
The dollar index fell 0.2% to 100.28 after easing 0.3% last week. The euro climbed 0.2% to $1.1190, having bounced on Friday after a benign U.S. inflation report. [USD/]
The euro zone releases inflation figures this week, along with producer prices and unemployment. German inflation and retail sales are due later on Monday, while European Central Bank President Christine Lagarde speaks to the European parliament.
Brent crude oil futures fell 52 cents to $71.46, while West Texas Intermediate was down 28 cents at $67.90.
While storm Helene had mostly passed, leaving devastation in many parts of the southern United States, a new tropical depression headed for landfall was expected to become another large and powerful hurricane later this week.
Hurricanes that hit the U.S. South and Eastern seaboard disrupt the supply chain of oil products and stoke supply concerns from the world’s current largest producer of oil.
A softer dollar combined with lower bond yields to help gold reach $2,685 an ounce. It was last at $2,637 an ounce, and on track for its best quarter since 2016.
