Market Analysis

Global stocks slipped on Wednesday, with China's stimulus-driven rally standing out as a bright spot. Meanwhile, the U.S. dollar came under pressure, and crude oil pulled back from a recent multi-week high.

European stocks declined by 0.1%, following a near 1% rise the previous day. Oil and gas shares were the biggest losers, dropping 0.9%, as concerns grew that China’s stimulus measures would fall short in boosting demand.

Wall Street was also poised for losses, with S&P 500 futures down 0.2%.

The dollar, meanwhile, dropped to its lowest in a month against the euro and hit a two-and-a-half-year low versus the British pound. U.S. consumer confidence data showed the sharpest decline in sentiment since August 2021, strengthening the case for another significant interest rate cut at the Federal Reserve’s upcoming meeting.

Market odds for a 50-basis point rate cut at the Fed’s November meeting rose to over 60%, up from 53% a day earlier, according to CME Group's FedWatch Tool.

"It seems likely that more rate cuts are on the horizon," said Samy Chaar, chief economist at Lombard Odier in Geneva.

In China, the People's Bank followed up its broad stimulus package on Tuesday by cutting medium-term lending rates on Wednesday. This comprehensive stimulus—China’s largest since the pandemic—also includes measures to boost its stock market and support the struggling property sector.

Mainland Chinese blue-chip stocks rose 1.4%, building on the prior session's 4.3% surge, while Hong Kong’s Hang Seng Index climbed 0.7%, adding to Tuesday’s 4.1% gain.

Although the stimulus was welcomed by markets, some analysts argue that the People's Bank of China has not fully addressed the primary challenge to economic growth: weak consumer demand.

"The measures fall short of tackling the imbalances caused by depressed domestic demand in China," Lombard Odier’s Chaar noted.

The rally in Chinese stocks briefly lifted other Asian markets, but those gains soon faded. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3%.

"The debate continues about whether this rally has staying power, though some investors are opting to buy or cover short positions before further analysis," UBS analysts mentioned in a note to clients.

DOLLAR UNDER PRESSURE

Overall, the dollar remained weak.

Following China's stimulus announcement, the yuan briefly strengthened to a fresh 16-month high, momentarily crossing the key 7-per-dollar threshold in offshore trading, before retreating to 7.0173 per dollar.

The euro inched up 0.1% to $1.1189, having earlier reached $1.1199, its highest level since August 26.

The Japanese yen traded steadily at 143.23 per dollar, fluctuating between modest gains and losses earlier in the day.

Sterling reached $1.3430, its highest since March 2022, before edging down 0.1%.

Australia’s dollar also hit a high of $0.6908, the strongest since February of last year, but later slipped to $0.68805 after inflation data showed signs of cooling, potentially paving the way for an earlier rate cut by the central bank.

"The drop in core inflation was an unexpected and welcome development," said Tony Sycamore, an analyst at IG.

Gold reached a new record peak of $2,670.43.

Brent crude futures fell 0.5% to $74.80 a barrel, not far from Tuesday's peak of $75.87, a level last seen on September 3.

U.S. West Texas Intermediate crude also dipped 0.5%, settling at $71.08 per barrel.

Paraphrasing text from "Reuters" all rights reserved by the original author.