China stocks, Hang Seng index soar as PBoC unveils aggressive stimulus package

China and Hong Kong stocks soared 4-5% after the country’s central bank announced new easing measures. Hong Kong’s benchmark Hang Seng index rallied over 4% to close above 19,000, while the Shanghai Composite made similar gains (4.15%) to close above 2,860.

The governor of the People's Bank of China (PBoC) made a public briefing cut the RRR by 50 basis points and the 7-day repo by 0.2 percentage points, and signalled further cuts, reduced the deposit on second mortgages, and said China will set up a swap facility.  

It was the broadest and deepest bit of simultaneous easing in a decade. Crude oil rallied, as did gold, hitting a new high overnight. Note also that several Federal Reserve officials on the wires Monday left the door open to further jumbo rate cuts this year — don’t fight the Fed, especially if Beijing is following suit.

After today's gains, the Hang Seng is up close to 11.5% year-to-date (YTD). Despite the recent surge, the Shanghai Composite is still the red for 2024, however — as of Sept. 24, it was down 3.76% YTD.

European equities rise, mining stocks lead gains in London on PBoC move

The boost for China and Asian equities were clear enough and we have a positive open for Europe early Tuesday with the CAC 40 up 1.2%, DAC +0.8% and FTSE 100 +0.45%. Miners led the gains in London with Anglo American up about 6% and others tracking around +4% on the China story. Wall Street put in another post-Fed relief rally session, the S&P 500 finishing at a fresh record high.  

Analysts at J.P. Morgan suggested investors "remain tactically bullish and think macro setup is supportive of rally into y/e; however, unlikely to be a straight line. [The U.S.] Presidential Election is largest source of uncertainty remaining...but we are inclined to buy every dip".  

Australian central bank leaves rates unchanged, says inflation “too high”

The Reserve Bank of Australia left rates unchanged, saying: “While headline inflation will decline for a time, underlying inflation is more indicative of inflation momentum, and it remains too high.”  

After rising to its strongest against the US dollar since Christmas, the Aussie was offered a bit on the news – although the hawkish bias was largely retained the central bank said it did not discuss hiking rates. A cut is likely to come in the coming months once the quarterly inflation report comes out at the end of next month.  

Germany PMI reading shows 4th straight month of job losses

It’s worth looking a bit more at the PMI figures from yesterday, particularly Germany. It showed the fourth straight month of job losses at the fastest rate in more than 15 years, new businesses down at the quickest rate in a year, and considerable softening of cost pressures, including output prices at a 44-month low. Then in France, the post-Olympic hangover in services was sharper than many had expected – down to 48.3 from 55 during the games.  

In all the flash PMI for September shows average prices charged for goods and services in the eurozone rising at the slowest rate since February 2021. The decline pushes the PMI’s selling price index to a level below that consistent with the ECB's 2% target – in other words, why wait to cut more?  

Here are other events and data releases to watch out for today: the US Conference Board consumer confidence survey, a speech from Fed Governor Michelle Bowman, and the release of OPEC’s annual World Oil Outlook.

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