Asia shares plunge on China’s small rate drop. As investors awaiting a larger stimulus package from Beijing, Asian stocks dipped on Tuesday.
On Tuesday, China dropped its one-year loan prime rate (LPR) to 3.55% and its five-year LPR to 4.20% for the first time in 10 months.
MSCI’s broadest Asia-Pacific ex-Japan index (.MIAPJ0000PUS) lost 0.69%. CSI fell 0.03%. U.S. markets were closed Monday.
“I don’t think they (the LPR cuts) are going to move the needle at all,” said Redmond Wong, Greater China market strategist at Saxo Markets. “Stronger message” to stimulate China’s property sector, he said.
China’s real estate index (.CSI931775) fell 0.74% early.
Beijing has lowered rates repeatedly to boost the world’s second-largest economy’s faltering growth amid deflation fears, property market troubles, and rising youth unemployment.
Last Thursday, the People’s Bank of China cut the medium-term lending facility rate. The market was speculating on what China could do next to restart the economy, but a cabinet meeting on Friday failed to deliver.
“We probably will need to wait for China’s Politburo meeting, headed by President Xi early in July, for any concrete announcement on a new round of stimulus,” National Australia Bank Senior FX Strategist Rodrigo Catril said in a client note.
After a few prominent banks, notably Goldman Sachs, lowered their Chinese economic growth projections, the delay in further stimulus measures weighed on mood.
U.S. Secretary of State Antony Blinken’s unusual visit to Beijing failed to yield a big breakthrough, but both sides agreed to stabilize relations to avert conflict.
“The meeting helped improve sentiment, but the market also understands that there’s strategic competition between the U.S. and China,” Saxo’s Wong said.
Hong Kong stocks fell 1.58% Tuesday. Nikkei.N225 fell 0.05%.
On Tuesday, commodity stocks led Australian equities to a seven-week high as traders awaited the central bank’s June policy meeting minutes for interest rate guidance.
The benchmark U.S. 10-year Treasury rate climbed 3.3 basis points. Brent declined 0.34% to $75.83, while U.S. crude fell 1.38% to $70.79.
Euro fell 0.1% to $1.0911 as the dollar index advanced 0.088%. Gold fell 0.1% to $1,948.39 an ounce.
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