China stimulus delivers the news people want to hear: commodities, global consumer spending names and EV giants lift
The world's two biggest economies are now cutting rates in unison. China's rate cuts today and stimulus delivers what markets want. Commodities, global consumer spending names, and EV giants are all lifting and seem well-supported. This isn't just a win for China—it's a global boost
In about 10 minutes, PBOC Governor Pan Gongsheng announced a bazooka of stimulus, never seen before, with policies that could provide trillions of dollars in liquidity to the Chinese economy, so China can hit its GDP growth target of around 5%. Here is what came out of the PBOC and financial regulator briefing and how markets reacted:
The PBOC cut the reserve ratio by 0.5 percentage points (that's the amount of cash banks must keep in reserve).
The PBOC cut the 7-day reverse repo rate to 1.5%, from 1.7%, and cut rates for existing mortgages. This also follows China's PBOC yesterday cutting its 14-day repo rate.
The PBOC cut the downpayment ratio on second homes to 15%, from 25%.
China's 10-year bond yield fell to 2% for the first time ever.
Consumer spending stocks like JD.com $JD-SW (09618.HK)$ gained 4.3%, EV leader Li Auto $Li Auto (LI.US)$ +3.8%, construction management group China Resources Land +3.3%, while casino giant Sands China $SANDS CHINA LTD (01928.HK)$ +3.1%.
Commodities gained an open runway for higher levels, with spot iron ore +1.7%, while copper and aluminum forward (futures) prices are up, supported by rising Chinese demand due to the stimulus. This has boosted BHP $BHP Group Ltd (BHP.AU)$ and $Rio Tinto Ltd (RIO.AU)$ shares up 3.3% each today. This is all while the path ahead for commodities is attractive as the Fed began cutting US rates, which should push the US dollar lower and thus make commodity prices appear 'cheaper.'
The Australian dollar vs the Yuan surged.
All in all, the big picture is postive. This is what markets and commodities needed. But now we just need to see data come through over the coming months that this stimulus is stoking demand, particularly in commodities. If the data shows that the biggest consumer of commodities is buying more goods and commodities, then commodity prices have a really nice setup for higher levels, perhaps over the coming year or so.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Moomoo Official Market Strategist
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DeltaPa : No QE
Cui Nyonya Kueh : Thanks for this
Jooooohn : I knew it was coming