Quick Recap
What a mess Chinese stocks could be today. On the bullish side there is the $1 trillion Yaun stimulus to the economy from the PBOC’s big 1% drop in banks reserve ratio requirement. While on the bearish side regulators on Friday have allowed fund managers to lend shares for short-selling. At the same time they have also expanded the number of stocks investors can short sell.
This saw Chinese stock futures sharply lower in US and European trade and was in large part responsible for the weakness in these markets – not forgetting enduring concerns about Greece.
Equally late last week there was a warning to new investors to be “calm and rational” from the head of the Chinese securities regulator, the CSRC.
That sets up an interesting day for not only China but markets more broadly in Asia and then tonight in Europe and the US.
The reality is that Chinese authorities are behind the curve when it comes to slowing the rate at which the economy is slowing. That guarantees that more stimulus will flow to the Chinese economy until the PBOC and Beijing can catch up and get ahead of the slowdown. That likely means that even though the disconnect between economic reality and Shanghai stocks is widening stocks may stay stronger for longer.
Elsewhere the Aussie leapt higher on the news in early trade this morning. It was up more than half a percent at one point in the 0.7815 region but it’s slipped back below 78 cents just now as traders fade the rally.
It’s all down to China today – but watch the ASX as well after the big break of support we’d been watching and which happened last Friday.
On the day
On the data front it is a quiet week really with nothing out in Australia today. In New Zealand CPI is out this morning, while tonight we get German PPI.
Here’s the overnight scoreboard (7.00 am AEST):
- Dow Jones down 1.54% to 17,826
- Nasdaq down 1.52% to 4,931
- S&P 500 down 1.13% to 2,081
- London (FTSE 100) down 0.93% to 6,994
- Frankfurt (DAX) down 2.58% to 11,668
- Paris (CAC) down down 1.55% to 5,143
- Tokyo (Nikkei) down 1.17% to 19,652
- Shanghai (composite) up 2.23% to 4,288
- Hong Kong (Hang Seng) down 0.31% to 27,653
- ASX Futures (SPI June) -47 to 5,815
- AUDUSD: 0.7814
- EURUSD: 1.0818
- USDJPY: 118.93
- GBPUSD: 1.49355
- USDCAD: 1.2214
- Crude: $56.14
- Gold: $1,204
CHART OF THE DAY:
EURO: Trying to break out.
We can’t really get excited until the EURUSD breaks up and through 1.1050/90. But if it can take out this trendline from the higs back in December when the Euro crash started it will be a sign that it might be on its way.
Recommended Content
Editors’ Picks
AUD/USD holds positive ground above 0.6500 on weaker US Dollar
The AUD/USD pair extends recovery around 0.6525 during the early Asian session on Thursday. The Federal Reserve held its interest rates steady at 5.25–5.50% at its meeting on Wednesday, citing a “lack of further progress” in getting inflation back down to its 2% target.
EUR/USD jitters post-Fed with NFP Friday over the horizon
EUR/USD cycled familiar territory on Wednesday after the US Federal Reserve held rates as many investors had expected. However, market participants were hoping for further signs of impending rate cuts from the US central bank.
Gold prices skyrocketed as Powell’s words boosted the yellow metal
Gold prices rallied sharply above the $2,300 milestone on Wednesday after the Federal Reserve kept rates unchanged while announcing that it would diminish the pace of the balance sheet reduction.
Solana price dumps 21% on week as round three of FTX estate sale of SOL commences
Solana price is down almost 5% in the past 24 hours and over 20% in the last seven days. The dump comes as the broader crypto market contracts with Bitcoin price leading the pack as it slides below the $58,000 threshold to test the Bull Market Support Band Indicator.
The FOMC whipsaw and more Yen intervention in focus
Market participants clung to every word uttered by Chair Powell as risk assets whipped around in a frenetic fashion during the afternoon US trading session.