Economic Overview

SINGAPORE (Reuters) – Chinese shares fell on Wednesday, and commodities experienced sharp losses as investors tempered enthusiasm for a Chinese economic recovery. Broader markets steadied due to expectations that the U.S. economy can avoid recession and support global demand.

The New Zealand dollar declined by 0.6% after the central bank cut interest rates by 50 basis points and expressed a downbeat outlook on the economy, suggesting the possibility of more cuts.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.6%, with Hong Kong shares rebounding around 2%, recovering from their heaviest fall since 2008 the previous day.

Market Reactions

On Tuesday, Hong Kong markets fell sharply, mainland shares dropped from highs, and commodities, including oil and metals, slid following a news conference from China's National Development and Reform Commission (NDRC) that provided no major stimulus details. The Shanghai Composite and blue-chip CSI300 fell approximately 3% on Wednesday.

Brent crude futures, which had fallen 4.6% overnight, steadied at $77.79 a barrel. Iron ore found support at $106 in Singapore after a 5% decline on Tuesday.

Vishnu Varathan, Mizuho's head of macro research for Asia ex-Japan, commented, "The disappointment, while understandable, appears premature and misguided. The NDRC is not positioned to provide detailed fiscal stimulus or monetary policy direction."

Japan's Nikkei index rose by 1%, with shares in convenience store Seven & I Holdings soaring after a report that Canadian retailer Alimentation Couche-Tard planned to increase its buyout offer.

U.S. Economic Outlook

U.S. equity futures remained steady in Asia, following solid gains in cash trade overnight as several Federal Reserve officials expressed optimism about managing interest rate levels for a soft economic landing.

New York Fed President John Williams noted that the unexpectedly strong jobs report for September indicated a healthy economy, while declining inflation allowed for potential rate reductions over time.

Traders have moderated their expectations regarding a 50 bps rate cut by the Fed in November, now pricing about an 88% chance of a 25 bps decrease.

Treasuries stabilized overnight after recent selling, with U.S. two-year yields at 3.96% and 10-year yields at 4.01%.

The U.S. dollar gained support from higher yields, trading at $1.0968 per euro and remaining steady at 148.25 yen. The Australian dollar weakened slightly to $0.6738, as traders anticipated further cuts from the Reserve Bank of New Zealand.

The kiwi traded at $0.6096, marking a seven-week low and testing its 200-day moving average. IG Markets analyst Tony Sycamore stated, "The forward guidance allowed the RBNZ the flexibility to cut rates again before year-end."

Minutes from the Federal Reserve's September meeting, where rates were cut by 50 bps, are expected later, alongside remarks from Fed officials Raphael Bostic, Lorie Logan, and Mary Daly.