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China Market falls after weeklong layoff

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The Mainland equity market stumbled on Monday, 08 October 2018, as traders in returned to work after a weeklong Golden Week holiday, following last week's wide selling in and a U. S.-listed benchmark of mainland companies falling nearly 5%, as worries grow of a sharp knock to growth from an escalating trade dispute with the Market participants largely ignored the latest percentage-point cut in banks' reserve-requirement ratios announced Sunday. Around late afternoon trade, the benchmark Shanghai Composite Index stumbled 2.65%, or 74.82 points, to 2,746.53, meanwhile the Index, which tracks stocks on China's second exchange, fell 2.7%, or 38.76 points, to 1,402.78. The blue-chip CSI300 index dropped 3.3%, or 112.29 points, to 3,326.57.

China's moved on Sunday to support the by slashing the level of cash that banks must hold as reserves. It was the fourth cut this year and comes as the struggles with the drag from an escalating trade dispute with the Reserve requirement ratios (RRRs) - currently 15.5% for large commercial lenders and 13.5% for smaller banks - would be cut by 100 basis points effective Oct. 15, the PBOC said, matching a similar-sized move in April.

ECONOMIC NEWS: foreign reserves slip to $3 Trillion in September-- China's foreign exchange reserves edged down 0.7 percent or 22.7 billion U. S. dollars from a month earlier, to 3.087 trillion U. S. dollars by the end of September, the said Sunday. This was attributed to a number of factors including exchange rate conversion and changing asset prices.

China services activity post modest gain-- Latest data from showed the improved services activity in China was offset by softer growth. The seasonally adjusted China General Services Business Activity Index was up from 51.5 in August to 53.1, strongest improvement in last three months. In contrast, production grew at a marginal pace, weakest since October 2017.

Caixin Composite PMI was little changed at 52.1, from 52.0 in August.

CURRENC NEWS: China's yuan declined against the U. S. dollar on Monday, inline with soft mid-point fixing by People of China. Prior to market opening, the People's (PBOC) set the midpoint rate at 6.8957per dollar its weakest level since May 11, 2017. China's yuan was weaker at 6.8979 per U. S. dollar, compared with a previous onshore close of 6.8725 per dollar. The offshore yuan was also weaker at 6.9039 per dollar.

Higher yields on U. S. Treasuries are likely to put more pressure on the yuan as China continues to make use of targeted policy easing to energize the domestic On Monday, the spread between Chinese and U. S. 10-year Treasury bonds was 58.4 basis points, compared with 150 basis points at the end of 2017.

OFFSHORE MARKET NEWS, US stock market closed down on Friday, as treasury yields extended a recent upward move following the release of the monthly jobs report, adding to recent concerns about the outlook for interest rates. The Dow Jones Industrial Average slid 180.43 points or 0.7% to 26,447.05, the Nasdaq tumbled 91.06 points or 1.2% to 7,788.45 and the fell 16.04 points or 0.6% to 2,885.57.

The major European markets ended down on Friday. The U. K.'s Index tumbled by 1.4%, while the German DAX Index and the French Index slumped by 1.1% and 1%, respectively.

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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, October 08 2018. 11:05 IST