Markets Diverge As China Economic Pledges Disappoint

Chinese leaders have pledged to boost consumption and provide support for the troubled property sector AFP

Stock markets diverged Friday as traders were disappointed by China's latest boosts to its beleaguered economy and looked ahead to a key US Federal Reserve meeting next week.

A tepid week was on course for a damp finish, with Wall Street offering a negative lead after fresh data pointing to a pick-up in inflation.

Hong Kong and Shanghai both tumbled as investors shrugged at Beijing's pledge to introduce measures aimed at "lifting consumption vigorously" as part of a drive to reignite growth in the world's number two economy.

President Xi Jinping and other key leaders said at the annual Central Economic Work Conference they would implement a "moderately loose" monetary policy, increase social financing and reduce interest rates "at the right time".

The gathering came after Beijing began unveiling in September a raft of policies to reverse a growth slump that has gripped the economy for almost two years.

"We're still not convinced that policy support will prevent the economy from slowing further next year", said Julian Evans-Pritchard, head of China economics at research group Capital Economics.

European markets fared better following interest rate cuts the day prior by the European Central Bank (ECB) and the Swiss central bank.

Paris stocks rose with French President Emmanuel Macron set to name the new prime minister Friday, after days of deadlock over finding a candidate to replace the ousted Michel Barnier.

Frankfurt also gained, despite the German central bank sharply downgrading its growth forecasts on Friday for 2025 and 2026 as it predicted a prolonged period of weakness for Europe's biggest economy.

London stocks edged up and the pound dropped after official data showed that the UK economy unexpectedly shrank for the second consecutive month in October.

The euro was stuck around two-year lows against the dollar after ECB president Christine Lagarde warned the eurozone economy was "losing momentum", cautioning that "the risk of greater friction in global trade could weigh on euro area growth".

All three main indexes in New York closed in the red, ahead of the Fed's meeting next week, when it is tipped to cut borrowing costs for the third time.

"While the markets still anticipate a rate cut from the Federal Reserve next week, the likelihood of a move in January has dropped," said Patrick Munnelly, partner at broker Tickmill Group.

There is growing concern over inflationary pressures of president-elect Donald Trump's pledges to cut taxes and impose tariffs as inflation still stands above the bank's target.

Shares fell in Tokyo even as the Bank of Japan's closely watched Tankan survey indicated a slight increase in confidence among Japan's major manufacturers.

Seoul extended to four days a rebound from the selling sparked by South Korean President Yoon Suk Yeol's brief martial law declaration, as the focus there turns to a second impeachment vote planned for Saturday.

The advance helped the Kospi briefly rise back above the level it sat at before Yoon's December 3 shock.

London - FTSE 100: UP 0.1 percent at 8,319.69 points

Paris - CAC 40: UP 0.4 percent at 7,449.73

Frankfurt - DAX: UP 0.4 percent at 20,499.07

Tokyo - Nikkei 225: DOWN 1.0 percent at 39,470.44 (close)

Hong Kong - Hang Seng Index: DOWN 2.1 percent at 19,971.24 (close)

Shanghai - Composite: DOWN 2.0 percent at 3,391.88 (close)

New York - Dow: DOWN 0.5 percent 43,014.12 (close)

Euro/dollar: UP at $1.0488 from $1.0468 on Thursday

Pound/dollar: DOWN at $1.2652 from $1.2669

Dollar/yen: UP at 153.49 yen from 152.68 yen

Brent North Sea Crude: UP 1.1 percent at $74.23 per barrel