China's Industrial Overcapacity and Weak Demand Keep Deflation Alive

China's benchmark indexes advanced on Wednesday as investors raised expectations for interest rate cuts following a steeper-than-expected decline in inflation. 

The Hang Seng Index increased 1%, and the mainland-focused CSI 300 index edged up 0.2%, and the consumer price index fell more than expected in August. 

China is struggling with an entrenched deflationary trend, as industrial oversupply and weak consumer demand keep prices in check. In addition, muted growth in exports limits businesses from clearing unsold inventories.

The Consumer Price Index in August declined 0.4% from a year ago, according to the latest data released by the National Bureau of Statistics on Wednesday.

The decline in inflation was the steepest in six months following a flat reading in July, driven by the largest fall in food prices in nearly four years. 

The decline in food prices accelerated to 4.3% from 1.6% in July, with broad-based decreases across several categories. 

Core inflation in August, which excludes volatile food and energy prices, increased 0.9% from a year ago. 

In addition, the producer price index decreased 2.9% from a year ago in August, easing from July's 3.6% decline, according to a separate report released by the NBS.

Factory-gate prices in August declined for the 35th consecutive month of contraction, confirming that price pressures are likely to persist for several months with weak demand and persistent overcapacity.

China Indexes and Stocks 

The Hang Seng Index increased 0.9% to 26,181.41, and the mainland-focused CSI 300 index rose 0.2% to 4,445.81. 

Alibaba Group Holding increased 2.2% to HK$144.80, Meituan advanced 3.3% to HK$103.0, and Tencent Holdings gained 1.6% to HK$637.0. 

Li Auto added 0.9% to HK$95.90, BYD edged up 0.4% to HK$97.0, and Xpeng Inc. advanced 0.9% to HK$81.55. 

China's Industrial Overcapacity and Weak Demand

China's benchmark indexes advanced on Wednesday as investors raised expectations for interest rate cuts following a steeper-than-expected decline in inflation. 

The Hang Seng Index increased 1%, and the mainland-focused CSI 300 index edged up 0.2%, and the consumer price index fell more than expected in August. 

China is struggling with an entrenched deflationary trend, as industrial oversupply and weak consumer demand keep prices in check. In addition, muted growth in exports limits businesses from clearing unsold inventories.

The Consumer Price Index in August declined 0.4% from a year ago, according to the latest data released by the National Bureau of Statistics on Wednesday.

The decline in inflation was the steepest in six months following a flat reading in July, driven by the largest fall in food prices in nearly four years. 

The decline in food prices accelerated to 4.3% from 1.6% in July, with broad-based decreases across several categories. 

Core inflation in August, which excludes volatile food and energy prices, increased 0.9% from a year ago. 

In addition, the producer price index decreased 2.9% from a year ago in August, easing from July's 3.6% decline, according to a separate report released by the NBS.

Factory-gate prices in August declined for the 35th consecutive month of contraction, confirming that price pressures are likely to persist for several months with weak demand and persistent overcapacity.

China Indexes and Stocks 

The Hang Seng Index increased 0.9% to 26,181.41, and the mainland-focused CSI 300 index rose 0.2% to 4,445.81. 

Alibaba Group Holding increased 2.2% to HK$144.80, Meituan advanced 3.3% to HK$103.0, and Tencent Holdings gained 1.6% to HK$637.0. 

Li Auto added 0.9% to HK$95.90, BYD edged up 0.4% to HK$97.0, and Xpeng Inc. advanced 0.9% to HK$81.55. 

Jumbo-Sized Rate-Cut Expectations Lift Wall Street Indexes to New Record Highs

Wall Street indexes advanced on Tuesday amid growing speculation that the Federal Reserve could deliver a larger-than-expected rate cut next week.

The S&P 500 index edged up 0.1%, and the Nasdaq Composite inched higher 0.2%, ahead of two key inflation reports this week. 

Consumer price inflation is likely to accelerate to an annual pace of 2.9% in August from 2.7% in July, and producer price inflation is expected to be stable at 3.3%. 

Rising inflationary pressures are likely to complicate policymakers' job amid deteriorating labor market conditions. 

The Fed's dual mandate requires policymakers to raise rates when inflation is on the upswing but trim rates when the job market is weakening.

For now, investors are holding out for a rate cut of at least 25 basis points, and some traders are hoping that the Fed may choose to deliver a one-time 50 basis point rate cut. 

U.S. Stock Movers 

Fox Corp. Class A declined 4.8% to $59.50, and the company announced that the Murdoch family has resolved its dispute over the trust, with Lachlan Murdoch gaining control of the conservative media complex.

Three Murdoch children—Elisabeth, James, and Prudence—will receive $1.1 billion each and cease to be beneficiaries of the trust that has significant stakes in New Corp. and Fox Corp.

Fox Corp. is facing a $2.7 billion defamation lawsuit from voting technology company Smartmatic USA Corp. 

News Corp. Class A decreased 4.5% to $28.60.

Dell Technologies decreased 0.8% to $122.01 after the company announced the resignation of chief executive officer Yvonne McGill, effective Tuesday. 

David Kennedy, senior vice president of global operations, was named as the interim CFO. 

Nebius Group NV jumped 54% to $98.85 after the artificial intelligence infrastructure provider signed a multi-year deal with Microsoft to provide cloud computing power for artificial intelligence-related queries. 

Apple Inc. decreased 0.3% to $237.15 ahead of the company's releasing new versions of its devices, including a new iPhone.