With China, it’s always hard to tell. But the big question is, are things really different for China this time around as compared to all their promises over the last few years? They’ve definitely stepped up the rhetoric but I want to say that actions speak louder than words at the end of the day. Chinese equities have endured a rough period of three straight years of declines but they will be snapping that in 2024. However, it owes much to the brief surge right before the Golden Week holiday going into October:

Domestic demand conditions are extremely subdued. And when you couple that with low inflationary pressures and the collapse of the property sector in recent years, it’s tough to build things back up from the ground. That is not to mention the more challenging outlook globally with Europe supposedly wanting to diversify from China and the ongoing trade war with the US. The latter is set to intensify further once Trump takes office next year.

There’s been a lot of big promises from Beijing to do more as per their big announcements since the lead up to the Golden Week holiday. But as seen by the chart above, investors are still holding some reservations.

The surging rally has come to a halt and there has been some consolidation only afterwards. A sign of caution perhaps? Or are investors biding their time for the next big announcement to dive back in again?

China has always been an interesting opportunity for investors no matter where you’re from. The last few years have been tough but that is expected as their handling of the Covid pandemic has been less than ideal. Hence, the rebound has been much slower.

I want to say there’s a lot of investor „angst“ towards China but not in the traditional sense. It’s more of a case that investors tend to regard China as a strong growth hub and recent years have made valuations there very, very cheap. So, it’s a case of them wanting China to bounce back and to get in on the action.

I don’t think we’re reaching a point of desperation just yet. But perhaps we’re arguably at a stage where investors are trying to will something to happen on just about any optimistic sign they can get.

That could lead to a couple of modest bounces for Chinese stocks as we look towards next year, similar to the spike seen above.

But in the bigger picture, I want to say that Beijing has to do more on the fiscal front to really convince. They can pull whatever numbers out of their behind on the economy but it’s not a great indication when nobody believes it.

And with the demographic challenge that China is facing over the next few decades, it’s going to be a major issue if they can’t steer the ship in the right direction from the onset. Japan 2.0 may be the future that they are looking at.

This article was written by Justin Low at www.forexlive.com.

Goldman Sachs from earlier this week (Bloomberg TV interview) on Chinese equities. Analysts at GS say stocks in China are supported on a dip in price next year. Chinese stocks face limited downside in 2025. GS cite:

• market has factored in trade tension risks already
• domestic stimulus measures offer a buffer against any further selloff
• market participants expect more concrete measures to boost consumption
• equity valuations have come off their October peak
• potentially improving fundamentals for companies
• GS forecasts 7% earnings growth for the MSCI China gauge in 2025, and 10% in 2026
• 60% US tariff hike on Chinese goods is unlikely, but if so 10% valuation downside from the current level

***

We’ve just had some announcements from China’s Ministry of Finance on further stimulus measures ahead (nothing specific yet):

• China finance ministry announce fiscal support measures

Reuters collated the headlines more broadly:

• China will step up fiscal spending and accelerate the pace of spending in 2025, according to the Finance Ministry.
• Fiscal spending will focus more on improving people’s livelihood and boosting consumption, the Finance Ministry stated.
• The government will arrange for larger-scale issuance of government bonds to provide additional support for stabilizing growth, the Finance Ministry reported.
• Efforts will be made to fend off risks in key areas, said the Finance Ministry.
• The government will further increase transfer payments to local governments to strengthen their financial capacity, according to the Finance Ministry.
• China will support the expansion of domestic demand, said the Finance Ministry.
• The Finance Ministry announced plans to appropriately increase the basic pensions for retirees and raise the basic pensions for urban and rural residents.
• Support will be provided for building a modern industrial system in 2025, with full efforts directed toward achieving breakthroughs in core technologies, the Finance Ministry stated.
• The government will actively expand effective investment, reasonably arrange bond issuance, and use government investment to drive more social investment, the Finance Ministry said.
• Efforts will be made to resolutely prevent issues such as arbitrary charges, fines, and unreasonable distribution of costs, according to the Finance Ministry.
• Tariff policies will be improved, and cooperation with ‚Belt and Road‘ countries will be deepened, the Finance Ministry reported.
• China will comprehensively deepen fiscal and tax system reforms and effectively prevent and resolve local government debt risks, the Finance Ministry stated.

This article was written by Eamonn Sheridan at www.forexlive.com.

Gold is down 1.3% on the month and the decline this month largely stems from a more hawkish Fed from last week. Barring a stirring rally in the coming week or so, gold looks poised to snap its seven year win streak in December in 2024 trading.

In the past decade, December is the second best month for gold behind the usual January rush. The latter has been a bit mixed in recent years but December has proven to be quite a consistent trend. That is up until now I guess.

The difference this year for gold is that it has observed nine straight months of gains prior to November. It is quite an unprecedented run as seen with the monthly changes above. And even with the recent decline in the past two months, it is still up nearly 27% this year. That puts gold on course for its best performing year since 2010.

So, one can argue that the consistent hot streak this year sort of takes away from usual buying rush in December and perhaps next month in January. That especially with conditions lining up for some profit-taking amid a more hawkish Fed and some technical obstacles.

For now, gold is moving back up above its 100-day moving average of $2,609 as it trades at around $2,617 currently. That’s a key line in the sand to watch in the weeks ahead after the recent double top at the 25 November high of $2,721.

If sellers can push the boundaries to hold a break below the key level, that will set the foundations for another potential break of the seasonal indicator when we get to January trading.

This article was written by Justin Low at www.forexlive.com.

The Biden administration has just announced a trade investigation into „legacy“ Chinese-made semiconductors today. And that could see it lead to more tariffs on chips from China that are used for autos, washing machines and telecoms gear among other things. This „Section 301“ probe is coming just less than a month before Trump takes office on 20 January 2025. The officials say that the investigation will then be handed over to Trump’s government for completion.

If anything, it just creates another avenue for Trump to impose hefty tariffs on China amid threats of a 60% tariff slap.

As for Biden, this builds on his escalation in this space over the last few months:

• US reportedly finalises steep tariffs on China, with many to begin on 27 September
• Latest US trade restrictions reportedly set to hit China’s semiconductor industry
• Biden administration to unveil more tariffs in parting gift to China

The USTR says that the latest probe will target mature-technology chips that power autos, appliances, medical devices, and other goods. The probe is supposedly based on evidence that „China is using anti-competitive, non-market policies to dominate global chip production“.

Once Trump takes office, the investigation will be handed over to his administration accordingly next month. The USTR will be accepting public comments on the probe as of 6 January before plans for a public hearing on 11-12 March next year.

This article was written by Justin Low at www.forexlive.com.

The changes on the day are light and it reflects the lack of appetite or incentive among traders to chase anything on the week. It’s one of those times in markets where there isn’t much of a point in trying to make sense of any moves as trading conditions are exacerbated by thin liquidity.

I mean it is the holiday period after all. For EUR/USD, there are large option expiries around €1.8 billion at 1.0425. So, that might offer some pull factor on the day. But the rest of the week promises to be much quieter.

As a whole, the dollar looks to be ending the year in a prominent spot as it has capitalised on a more hawkish Fed last week. The technicals are certainly siding with the greenback as we enter the festive season at least. And barring any major headline shifts, trading sentiment should pick up from where we are leaving off at the start of next year.

That means one can ignore the movements we’re seeing in markets during this week as they will be largely influenced by thinner liquidity conditions.

It’s the best time to take a step back, review everything, and look to start the new year fresh. To those already enjoying the break, I wish you happy holidays. And to those who aren’t, well try and take it easy.

This article was written by Justin Low at www.forexlive.com.

• Domestic sight deposits CHF 448.0 bn vs CHF 448.2 bn prior

Swiss sight deposits are little changed in the past week, holding at levels seen in the past few months still. That doesn’t suggest any major signs of intervention on the part of the SNB at least. Here’s the trend:

This article was written by Justin Low at www.forexlive.com.

• Prior +0.8%
• GDP +3.3% vs +3.4% y/y prelim
• Prior +3.2%

No change to the quarterly estimate as the Spanish economy remains one of the few bright spots in Europe, especially with the two biggest economies – Germany and France – collapsing.

This article was written by Justin Low at www.forexlive.com.

Boris Vujčić, Governor of the Croatian National Bank and European Central Bank Governing Council member spoke in an interview Saturday, confirming what we all know – more rate cuts to ahead from the Bank.

• “The direction is clear, it’s the continuation of the direction from 2024, and that is the further reduction of interest rates”
• He doesn’t know where the terminal rate will be:“That will be determined by data, primarily the inflation rate, will it decelerate, according to our projections, and we will see the impact of the transmission of the monetary policy, and our projections.”

On Trump tariffs:

• “If there is a trade war, that will be bad for growth in Europe and in the rest of the world“
• „a trade war, that won’t be good for anyone”

At its final meeting this year the European Central Bank cut rates:

• ECB cuts rates by 25 basis points

EUR/USD closed the week well under 1.05, policy divergence expectations weighed heavily (but not exclusively).

This article was written by Eamonn Sheridan at www.forexlive.com.

• US November core PCE +2.8% y/y vs +2.9% expected
• Canada retail sales for October 0.6% versus 0.7% expected
• Canada’s NDP says they will vote to defeat the Liberal government
• Fed’s Goolsbee: Nice to get inflation number that is better than expected
• Fed’s Williams: Inflation data since Sept has been ‚a touch higher‘
• Fed’s Hammack: Rate cut was a ‚close call‘ and she favored holding policy steady
• EU consumer confidence flesh for December -14.5 versus -13.7 last month
• University of Michigan consumer sentiment final 74.0 versus 74.0 preliminary
• Fed vice chair for supervision is worried that Trump will try to remove him – report
• Dallas Fed trimmed mean November PCE price index +1.8% vs +2.9%
• House speaker Johnson: We have a unified agreement among Republicans
• Canada October budget balance C$-1.49 billion vs previous C$-3.17 billion
• RBC card spending data shows softer Canadian spending ahead of today’s retail sales report
• Fed’s Daly: The recalibration phase is now over

Markets:

• S&P 500 up 1.1%
• WTI crude up 15-cents to $69.53
• US 10-year yields down 4.2 bps to 4.52%
• Gold up $30 to $2623
• JPY leads, USD lags

The mood shifted sharply on Friday as stocks looked set for another rout in the pre-market only to reverse higher. The FX market followed a similar pattern, though the moves were less-dramatic. That meant US dollar selling after the dollar hit some of the best levels of the year early in Asia.

Two things turned markets: The PCE report and progress on avoiding a government shutdown.

On Wednesday, the Fed comments indicated a big shift towards worries about inflation but the PCE report brought a dose of reality back to the debate as the numbers were lower than expected and not at levels so worrisome that the Fed would need to contemplate hiking.

Comments from Goolsbee and Williams underscored that, assuring markets that the path for rates is still lower and that the only real debate is the pace of cuts.

Some of the machinations around the debt ceiling debate also underscored a Trump/Musk recalibration around fiscal hawkishness. It’s not yet clear how it will shake down so keep a close eye over the weekend. The real thing to watch is how the new administration prioritizes fiscal consolidation relative to corporate tax cuts. The vast majority of the market thinks the top priority is the stock market but that could be a miscalculation.

In terms of market moves, USD/JPY fell hard on some verbal intervention from Tokyo and it continued to drift lower in the US as Treasury yields ticked lower.

The euro bounced impressively after touching 1.0344 while the Australian and Canadian dollars rebounded from the worst levels of the year. The pound touched below the November lows in Asia the bounced to 1.2600 before fading 25 pips below the figure.

I would expect the first reaction on Monday to center around the government shutdown response but we’re deep into the holiday season now so the temperature might fall.

Have a great weekend.

This article was written by Adam Button at www.forexlive.com.

The major U.S. stock indices ended the day with gains of 1% or more for all three major benchmarks, but they closed lower for the week. Here’s a detailed snapshot:

Closing Levels (Daily Gains):

• Dow Jones Industrial Average: rose 498.82 points (+1.18%) to close at 42,841.06.

• S&P 500 Index: rose 63.79 points (+1.09%) to close at 5,930.87.

• NASDAQ Composite: rose 199.83 points (+1.03%) to close at 19,572.60.

• Russell 2000 (Small-Cap Index): rose 20.86 points (+0.94%) to close at 2,242.36.

Weekly Performance:

• Dow Jones Industrial Average: fell -2.25%.

• S&P 500 Index: fell -1.90%.

• NASDAQ Composite: fell -1.78%.

• Russell 2000 Index: fell -4.45%.

Technical Insights for the NASDAQ Composite:
On the hourly chart, the NASDAQ index tumbled below its 200-hour moving average (19,428.78) and an upward-sloping trendline during the trading day. However, it failed to sustain the downward momentum and rebounded to close between its 200-hour moving average and its 100-hour moving average (19,803.75).

Outlook for Next Week:

• Trading above the 100-hour moving average would indicate a bullish short-term bias.

• Trading below the 200-hour moving average would signal a bearish short-term bias.

The interaction with these key moving averages will be critical in determining the direction of the NASDAQ Composite in the coming days.

Technical Insights for the S&P Composite:
On the hourly chart, the S&P index fell below its 100 and 200 hour moving averages and 6040.97 and 6001.31. That tilted the bias more to the downside. The low price for the week did extend below a swing area between 5853.00 and 5878.47, but the price quickly snapped back in trading today. The selllers had their shot and they failed.

Going into next week, the target resistance on the topside would be the moving averages. The swing area on the downside will be supported

Outlook for Next Week:

• Trading above the 200- hour MA and 100-hour moving average (green and blue lines) would indicate a bullish short-term bias.

• Trading swing area support would signal a bearish short-term bias.

The interaction with these key moving averages will be critical in determining the direction of the NASDAQ Composite in the coming days.

This article was written by Greg Michalowski at www.forexlive.com.