Shanghai Composite Weakens after China Leaders Vow to Reform, Not Stimulate Economy

The major Asian stock indexes are trading mixed early Tuesday as investors brace for the start of deluge of U.S. earnings reports this week. The price action reflects the mixed performance on Wall Street on Monday where the blue chip Dow posted a loss among slightly better performances by the benchmark S&P 500 Index and the technology-based NASDAQ Composite.

In the cash market at 02:50 GMT, Japan’s Nikkei 225 Index is trading at 22164.83, down 53.07 or -0.24 percent. Hong Kong’s Hang Seng Index is trading 29932.19, down 31.07 or -0.10 percent and South Korea’s KOSPI Index is at 2218.77, up 2.12 or +0.10 percent.

China’s Shanghai Index is at 3198.55, down 16.49 or -0.51 percent and Australia’s S&P/ASX 200 is at 6308.80, up 49.00 or +0.78 percent.

Change in Government Policy Pressuring Chinese Markets

Mainland Chinese shares were lower for a second day on Tuesday as investors continued to react to a South China Morning Post report that Beijing could refocus on structural reforms instead of offering stimulus measures after last week’s first quarter GDP report showed better-than-expected economic growth.

The report also said that China’s senior communist leaders have congratulated themselves on saving the country’s economy from a hard landing during a trade war with the United States and have decided to focus on “structural reforms”, instead of stimulus, to move the economy forward.

The Politburo, the 25-member ruling body of the country headed by President Xi Jinping, reviewed China’s growth in the first quarter on Friday and concluded that market confidence has returned and economic performance was “better than expected”, the official Xinhua news agency reported.

If you recall, last week, China reported that its gross domestic product expanded by 6.4 percent in the first quarter of this year, exceeding most estimates and remaining at the top end of China’s target growth range of 6.0-6.5 percent for 2019, although many incentives, including a cut in value-added taxes, were yet to take effect.

Investors reacted to the news by selling shares because of disappointment in the news. Stimulus measures tend to have an immediate impact on the economy and stocks, while structural reforms tend to take longer to work their way through the economy.

U.S. Stocks Making Biggest Moves after Close

After the close on Monday, shares of Whirlpool jumped as much as 9% in extended trading following the release of the home appliance company’s mixed first-quarter earnings. Earnings per share beat the forecast while revenue came in on the light side.

Shares of Cadence Design surged more than 5% after hours Monday in reaction to better-than-expected first-quarter earnings.

Facebook shares also rose after the bell on Monday after the social media giant made a personnel change, hiring Jennifer Newstead as its general counsel.