Chinese stocks rallied on Tuesday on hopes that the government in Beijing was on its way to an easing of monetary policy as a measure to address what is turning out to be the slowest growth seen in the country in years. Latest GDP figures point to a 6.9% growth in Q3, which is 10 basis points lower than the country’s 2015 GDP target. The Shanghai Composite Index closed 1.1%, higher on expectations that the People’s Bank of China was set to release its own version of a stimulus package.
However, the picture in Asia was mixed. While the Nikkei225 Index and South Korea’s KOSPI both closed 0.4% higher, lower oil prices and lower energy shares dragged down the Hang Seng Index and S&P/ASX 200, which lost 0.4% and 0.7% respectively.
According to a market strategist at IG Markets, “Markets are mixed because investors are broadly still uncertain about how the Chinese government is going to react in the fourth quarter, while some investors are anticipating more easing coming out.” Global oil prices are to a good measure dependent on the appetite of Chinese industries, and lower oil prices generally raise concerns of lower Chinese demand and therefore slower economic growth in China.
Energy shares have still not found any reprieve as oil prices continue to be stuck in a range between $44 and $50. Energy shares in Hong Kong and Australia have been among hardest hit. Companies such Woodside Petroleum, Santos, Origin Energy, PetroChina Co. and China Shenhua Energy Co. have all lost between 1.5% and 5% of their values.
In other news, Amazon.com Inc. said on Monday that it would add an 25% more seasonal workers for its U.S. warehouses as the world heads into the holiday shopping season. Amazon plans to hire 100,000 such workers, up from 80,000 last year in a move beef up staff requirements in its expanded number of warehouses so as to hasten deliveries and lower shipping costs. According to Amazon, more than 50 U.S. warehouses and 20 package sorting centers in the U.S. have become functional and more than 25,000 seasonal workers have been engaged since August.
This is coming on the projections that holiday hiring by U.S. retailers is expected to be mostly flat this year as shopping habits change, according to global outplacement firm Challenger Gray & Christmas Inc.
In currency news, the emerging market currency of Malaysia, the ringgit dropped 1.8% to the U.S. dollar in a move which is seen as a reaction to lower crude prices which are hurting the country’s oil exporters.
The Aussie Dollar rose against the USD after the Reserve Bank of Australia sounded hawkish on the broader economy despite significant risks to the country’s property markets. This was contained in the RBA minutes of its monetary policy meeting held earlier in October. The RBA left rates unchanged at 2.0%, which represents a record low interest rate for Australia. The RBA however indicated that the lower Australian dollar was boosting the economy by rebalancing it away from the mining-led growth and that the job market appears solid. The mining sector has taken a huge hit and therefore rebalancing away from the commodity-boosted growth pattern to one based more on services exports has been seen as key to the stability of the Australian economy.
Some economists have however voiced concerns over the relatively neutral RBA stance, stating that the RBA should assume a more pronounced easing bias to counter the effects of China’s economic slowdown. A bulk of Australia’s commodity exports is consumed by China.
Nothing much has changed in the commodity space. Brent crude continues its range-bound trade, with WTI crude trading as high as $47.93 but had slid to $46.32 in Tuesday trading. Gold prices were down 0.3% at $1169.00 a troy ounce on Monday but had staged a slight recovery to $1175.32 in early Tuesday trading.
Producer prices in Germany have fallen more than expected in September, pulled lower by energy prices, official data showed Tuesday. According to data by the German federal statistics office, the cost of goods leaving the gates of German factories for September have fallen by 0.4% on the month and were 2.1% lower year on year, which was lower than estimates of economists polled by the Wall Street Journal. This represents the sharpest annual reduction since February. Consensus forecast had predicted declines of 0.1% and 1.8%, respectively.
Energy prices once again had the largest effect on producer prices, Destatis, the German statistics office said. Energy prices dropped 1.1% from August and were 6.1% lower compared with September last year.