Alarmed by a $4.4 trillion stock market plunge, Chinese authorities are launching a multi-pronged rescue mission. State-owned firms will be incentivized to improve performance; regulators vow to crack down on manipulation and stabilise markets; and targeted interventions like limiting short selling offer immediate support. Though scepticism lingers, Beijing's resolve and attractive valuations are drawing cautious optimism, with some investors like Bridgewater seeing potential opportunity in the turmoil.
EQUITY
US markets slowed their gains, albeit with strong earnings from United Airlines and Verizon and mixed performances from industrials and homebuilders. Asian markets saw mostly profit-taking, with Japan pulling back after BoJ hints at future policy adjustment, while Hong Kong reversed the trend thanks to Alibaba and the Chinese government pledging $287 billion from offshore funds.
GOLD
Gold prices were pressured by strong US data, although prices found support in geopolitical tensions. The allure of bullion as an inflation hedge has waned in recent times with the prospect of fewer rate cuts. Market eyes now turn to key economic data releases this week, including US flash PMI and GDP estimates, which could further influence the Fed's trajectory.
OIL
Crude posted a small loss after a hopeful gain on Monday as tepid global demand and a strengthening dollar countered geopolitical tensions. While U.S. crude stocks fell reassuringly, a surge in gasoline inventories and a resilient US dollar curbed enthusiasm. Analysts anticipate a stable price range for Q1 2024, barring supply disruptions, unless Saudi Arabia is dragged into the conflict.
CURRENCY
The dollar was strengthened by renewed expectations of a steady-to-hawkish Fed. Investors unwound earlier bets on near-term rate cuts, driving the dollar index to six-week highs. Meanwhile, the Japanese yen found support from stronger trade data and Governor Ueda's hints at a potential policy shift. Elsewhere, the euro dipped ahead of the ECB meeting and the yuan tumbled, though a potential government rescue package offered some hope.
