Mainland Chinese and Hong Kong equity markets fell on Monday after data showed China's economy grew more slowly than expected in the third quarter, weighing on regional stocks, although losses were capped by hopes of support from policymakers.

Oil prices, meanwhile, hit new multi-year peaks, continuing their recent surge amid a global energy shortage, with US crude at a fresh seven-year high and Brent at a three-year high.

China's gross domestic product (GDP) grew 4.9 per cent in July-September from a year earlier, the weakest pace since the third quarter of 2020, as China grappled with power shortages, supply bottlenecks and sporadic COVID-19 outbreaks as well as rising jitters over the property sector.

Chinese blue chips were down 1.53 per cent and the Hong Kong benchmark lost 0.56 per cent, although most of the falls came right after the bell, prior to the release of the data.

"In response to the ugly growth numbers we expect in the coming months, we think policymakers will take more steps to shore up growth," said Louis Kuijs, head of Asia economics, Oxford Economics.

"We think the electricity shortages and production cuts will become less of a problem later in Q4. In line with our expectation, senior policymakers have started to stress growth and we expect them to start calling for the pursuit of climate targets on a more measured timeline."

The weaker-than expected data weighed on regional benchmarks. MSCI's broadest index of Asia-Pacific shares outside Japan was last down 0.2 per cent, while Japan's Nikkei lost 0.3 per cent. US stock futures, the S&P 500 e-minis, were steady.

The Asian declines come after stocks globally finished last week in a bullish mood posting their best day in five months on Friday as strong US corporate earnings reports fuelled optimism about the economy, although firm oil prices kept inflation risks alive and lifted government bond yields.

Investors, meanwhile, continue to fret over inflation, driven by a reopening from COVID-19 and supply chain issues, said Shane Oliver, chief economist at AMP, pointing as an example to New Zealand, which on Monday reported a 2.2 per cent rise in its consumer price index in the third quarter, the fastest pace in over a decade.

"But in the last two weeks share markets have been shrugging off most things," he added.

Analysts at CBA said as inflation pressure builds, they expect US rates to rise, supporting the US dollar, which "has further upside in our view".

The yield on benchmark 10-year Treasury notes rose as high as 1.5930 per cent on Monday, heading back towards the four-month high of 1.6310 per cent hit early on Tuesday, before a wobble later in the week.

The pound could gain on the dollar this week as "UK economic and inflation dynamics support the upward shift to the UK interest rates," the CBA analysts added.

In early trading on Monday, most currencies were quiet. The greenback was little changed against a basket of its peers at 93.992, off its one-year high of 94.563 hit last Monday, while the yen hovered near its almost three-year low against the dollar.

US crude was last up 1.28 per cent at $83.33 a barrel, while Brent crude was last 0.85 per cent higher at $85.58 per barrel.

Gold was last up 0.14 per cent at $1,769.60 an ounce, after falling 1.5 per cent on Friday on higher US bond yields and a rise in US retail sales.

Bitcoin was within sight of its all-time high, sitting at $62,000 and not far from April's record of $64,895, having gained last week on hopes that US regulators would allow a futures-based exchange-traded fund.

Related Topics
comment COMMENT NOW