China unleashes stimulus

China Unleashes Stimulus – China’s central bank has announced a comprehensive set of monetary stimulus measures aimed at revitalizing the second-largest economy in the world. This move reflects the growing concern within Xi Jinping’s government regarding the slowing growth and diminished investor confidence in the country.

During a rare briefing in Beijing, the People’s Bank of China Governor, Pan Gongsheng, lowered a key interest rate and revealed plans to decrease the amount of money that banks are required to hold in reserve to the lowest level since at least 2018. This marked the first time that reductions to both measures were disclosed on the same day.

Following these announcements, a series of other measures were unveiled, leading to gains in Chinese stocks. The central bank chief also revealed a package intended to support the troubled property sector in the nation, which includes lowering borrowing costs for as much as $5.3 trillion in mortgages and easing rules for second-home purchases.

While some of these measures were expected by investors, the highly publicized rollout indicates that authorities are taking seriously the warnings that China may fall short of its growth target of around 5% this year. The policy barrage is likely to bring that goal back within reach, but doubts persist regarding whether it is sufficient to counter China’s longer-term deflationary pressure and entrenched real estate crisis.

Gold rises to record high

Gold reached a record high as investors analyzed comments from Federal Reserve officials, which seemed to suggest the possibility of further significant interest rate cuts. Bullion rose by as much as 0.3% to $2,636.16 an ounce, surpassing the previous all-time high set on Monday. Chicago Fed President Austan Goolsbee stated that with inflation approaching the 2% target, the focus should shift to the labor market, implying the likelihood of numerous rate cuts over the next year.

Significant geopolitical tension in the Middle Eas is increasing the risks in the Middle East, potentially providing support for Gold. Additionally, the closely contested US presidential election is just six weeks away.

Yen extends decline to 144 versus dollar

Governor Kazuo Ueda restated that the Bank of Japan is open to raising its key interest rate, but won’t rush into a decision based on data. This suggests that there is little likelihood of a policy change at the upcoming meeting. This reaffirms the message he delivered last Friday when the board unanimously voted to keep the rate unchanged. Ueda also acknowledged criticism of the bank’s communication prior to the July 31 rate hike. In light of this, his recent comments indicate a cautious approach, leading many BOJ observers to believe that the board will maintain the current rate at the October 31 meeting. Most economists anticipate that the bank will likely wait until December or January before raising the benchmark rate again, following two rate hikes earlier this year.

RBA signals key rate to stay at 12-year high

The Central Bank of Australia indicated that it plans to maintain its current high key interest rate for the time being due to persistent inflationary pressures, which are preventing it from following the global trend of lowering interest rates.

During a press conference in Sydney, Governor Michele Bullock stated, “Based on what we know at the moment, rates will remain unchanged for the time being.” She also mentioned that the Reserve Bank of Australia (RBA) is not ruling out any policy options.

Following this announcement, the Australian dollar declined by 0.3% to 68.17 US cents in early London trading, reversing an earlier gain. Additionally, the yield on three-year government bonds experienced its largest decline in almost two months. Swaps traders are now estimating a 74% probability of a rate cut in December, up from 50-50 just before Bullock’s press conference.

Oil advances after China announces sweeping support measures

Oil prices increased after Chinese authorities implemented a series of supportive policies for the economy. Tensions remained high in the Middle East. Concerns about the slowing Chinese economy and the potential increase in oil supplies from OPEC+ have contributed to a 14% decrease in oil prices this quarter. The measures announced on Tuesday, including increased bank lending to consumers and businesses and a reduction in the PBOC’s key short-term interest rate, could bolster growth and energy demand in the world’s largest oil importer.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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