Most Asian stocks slid on Tuesday, led by sharp declines in Hong Kong as the start of China's week-long annual session of parliament disappointed investors with its lack of big ticket stimulus plans to prop up the struggling economy.
Equity markets in the region were
already on the back foot following a retreat from record highs on Wall Street
on Monday, amid signs the U.S. Federal Reserve is in no hurry to cut interest
rates. U.S. stock futures also pointed lower, as did European futures.
Bitcoin continued its ascent to a fresh two-year peak of
$68,828 that put it within spitting distance of an all-time high. Gold marked a
record closing high of $2,114.99 on Monday and continued to hover around that
level.
The Chinese government retained last year's target for
economic growth of "around 5%" for this year, and announced plans to
run a budget deficit of 3% of economic output, down from a revised 3.8% last
year.
It also unveiled plans to issue 1 trillion yuan ($139
billion) in special ultra-long term treasury bonds, which are not included in
the budget.
Mainland stocks reversed early losses with the blue-chip CSI
300 up about 0.45% by 0600 GMT, amid signs of suspected state-backed buying of
some exchange-traded funds.
However, that failed to lift other markets in the region
with Hong Kong's Hang Seng deepening earlier declines to 2.67%. MSCI's broadest
index of Asia-Pacific shares outside Japan lost 1%.
The early announcements from China's NPC suggest "large
fiscal stimulus is off the table for now," said James Kniveton, senior
corporate FX dealer at Convera.
"Stability is still the overriding factor in Chinese
policy making, and the announcements so far seem to conform to that
philosophy."
Japan's Nikkei erased early losses in the afternoon session,
but ended the day slightly down to miss out on a new record high close.
Meanwhile, alternative assets such as cryptocurrencies and
bullion have been supported and equities sold following hawkish comments from
Atlanta Fed President Raphael Bostic that there was no urgency to cut interest
rates amid risks inflation stays above the central bank's 2% target.
Those remarks frayed nerves ahead of Fed Chair Jerome
Powell's semi-annual testimony to Congress later in the week, as well as a
deluge of key data on prices and jobs, culminating with Friday's non-farm
payrolls report.
"There are signs of slight irrational exuberance and
maybe a squeeze of long-suffering shorts in some markets," particularly
bitcoin and gold, said Kyle Rodda, senior markets analyst at Capital.com.
"The moves have come despite only a minor shift in
rates market pricing."
Odds for a U.S. rate reduction by the Fed's May meeting
declined below 22% from 26% a day earlier, according to CME Group's FedWatch
Tool.
The dollar index, which measures the currency against six
major peers, edged up 0.02% to 103.86. It eased 0.07% on Monday, as declines
against rivals like the euro and sterling overshadowed gains against the yen.
The euro was flat at $1.0852, after advancing 0.14% on
Monday, with the European Central Bank due to set policy on Thursday. Traders
are convinced it will keep rates steady at the meeting, but futures imply an
88% probability that cuts will start in June.
Sterling was little changed at $1.2685, following a 0.3%
rise at the start of the week, in the run-up to Wednesday's UK budget. Finance
Minister Jeremy Hunt has been trying to dampenspeculation about big
pre-election tax cuts.
Against the yen, the dollar was steady at 150.49, following
Monday's 0.27% climb. The currency pair tends to be extremely sensitive to
moves in long-term U.S. bonds, and benchmark 10-year Treasury yields bounced
from 2-1/2-week lows overnight to sit at 4.21%.
Elsewhere, crude oil continued to tick lower, as demand
headwinds counterbalanced a widely expected extension of voluntary output cuts
through the middle of the year by the OPEC+ producer group. [O/R]
Brent futures were off 17 cents to $82.63 a barrel, while
U.S. West Texas Intermediate (WTI) eased 25 cents to $78.49 a barrel. -Reuters
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