China needed to show up with a double-barrelled bazooka this week and it only had one.
Monetary policy delivered with a handful of impressive measures including rates cuts, shifts in reserves, financing for real estate buybacks and looser borrowing rules.
That was a great start and it caused a squeeze in beaten-up China assets. More importantly, right away the market began pricing in a second-leg to the efforts to turn around the Chinese economy: Fiscal stimulus.
Ideally, we would have gotten this announcement together. A day apart would have been fine too. But we’re more than 36 hours since the monetary announcement and very little has been delivered on the fiscal side. Next week is a holiday in China so time is running out.
The market isn’t waiting any longer and much of the excitement from yesterday has faded. AUD/USD has given back all its gains.
AUD/USD 5 mins
It’s the same story in other risk trades, oil and most other commodities (copper is still holding up).
Chinese stock might hold up because there are some specific measures for China’s equity market and they’re utterly beaten down but so far this isn’t the kind of package to make anyone believe that 2025 is going to be a great year for the Chinese economy.