SINGAPORE: Japanese rubber futures snapped a two-session rally on Monday, underpinned by lingering sluggish demand and weak fundamentals, while earlier optimism from stimulus pledges in China faded. Osaka Exchange’s rubber contract for November delivery finished 1.1 yen, or 0.5%, lower at 210.2 yen ($1.48) per kg. The rubber contract on the Shanghai futures exchange for September delivery fell 50 yuan to finish at 12,085 yuan ($1,688.34) per metric ton.

Japan’s benchmark Nikkei average closed down 1%. China’s cabinet met on Friday to discuss measures to spur growth in the economy, state media reported, pledging to roll out policy steps in a timely way amid signs that a post-COVID recovery is fading. Rubber inventories in warehouses monitored by the Shanghai Futures Exchange rose 0.6% from a week earlier, up for the first time in almost 3 months, the exchange said on Friday, stoking fears that excess supply might drag prices lower. Likewise, global oil prices fell more than 1% on Monday, backing off last week’s gains, as questions over China’s economy outweighed OPEC+ output cuts and the seventh straight drop in the number of oil and gas rigs operating in the US.

Lower oil prices incentivise manufacturers to shift to synthetic rubber, derived from oil, hindering the natural rubber market. The yen strengthened 0.11% against the dollar to 141.70, making yen-denominated assets less affordable when purchased in other currencies. Asian shares fell, consolidating gains after their best weekly run in five months, while investors looked ahead to China’s rate decision and US Federal Reserve Chair Jerome Powell’s testimonies for clues on the path ahead.