December 09, 2024 at 12:11PM
Headlines:
China’s Politburo says will implement a more moderately loose monetary policy
China president Xi: We must be fully prepared to achieve next year’s economic targets
China promise for even bigger easing lifts risk sentiment
Weekly update on interest rate expectations
SNB total sight deposits w.e. 6 December CHF 458.8 bn vs CHF 458.9 bn prior
Eurozone December Sentix investor confidence -17.5 vs -13.5 expected
Taiwan steps up military alert ahead of China drills
Markets:
AUD leads, JPY lags on the day
European equities mixed; S&P 500 futures down 0.1%
US 10-year yields up 1.3 bps to 4.166%
Gold up 0.9% to $2,656.02
WTI crude up 1.3% to $68.09
Bitcoin down 3.0% to $98,092
The big news to start the week was China vowing for stronger stimulus measures, changing their monetary policy stance for the first time since around 2011. The Politburo had a meeting and announced after that they are going to embrace a more “moderately loose” monetary policy approach, as opposed to their more “prudent” approach before.
Besides that, there was the usual promises of stepping up fiscal measures in order to try and revive domestic demand conditions.
That helped to give the broader risk mood a lift but not everything held the course in European morning trade.
Equities raced higher initially with S&P 500 futures also turning on gains to around 0.1% before switching back lower by 0.1% now. Similarly, European indices opened higher but are now keeping more mixed with the DAX seen down 0.1%.
In FX though, the aussie is biggest beneficiary as traders viewed this as a boost to the China outlook potentially. AUD/USD moved up from 0.6385 to be up 0.8% now to 0.6445. Meanwhile, the dollar eased slightly against the likes of the euro and pound but nothing too outstanding.
It might just be a matter of time before traders start to have some seeds of doubt again, especially since these promises have been ongoing for quite a few years already; in particular the fiscal side of things. As for the monetary side, one can definitely expect the PBOC to step up easing measures next year but the change in language perhaps means that they might accelerate the pace of the moves.
But again, it takes two to tango and China needs help from the fiscal side as well to really convince of a significant turning point.
In other markets, gold is also holding higher on the news and helped by China numbers showing that they are stepping back purchases again over the weekend. The precious metal is up 0.9% to $2,656 but is still keeping thereabouts as seen in the past week.
This article was written by Justin Low at www.forexlive.com.
