Markets rally on China stimulus cheer

• FXTM Asian stock indices rally

• CN50 ↑ 6% on “risk-on” mood

• Oil benchmarks soar ↑ +2%

• AUDUSD hits fresh 2024 highs

• Bloomberg FX model – 74% - (0.6757 – 0.6933)

China has hijacked the headlines after its central bank unleashed a wave of stimulus measures to revive economic growth.

In a move welcomed by investors on Tuesday, the People’s Bank of China (PBoC) cut benchmark interest rates while unveiling measures to restore market confidence and ailing property sector.

This development triggered a “risk-on” mood across Asia during early trading, propelling FXTM’s Asian stock indices higher.

• CN50: +6.2%

• CHINAH: +5.0%

• HK50: +4.3%

China’s raft of stimulus measures comes less than one week after the Federal Reserve cut interest rates for the first time in 4 years. With the world’s second largest economy on a mission to achieve its 5% annual growth target, this could boost overall market sentiment.

In fact, European markets rallied this morning while US equity futures are pointing to a positive open.

• EU50: 1.2%

China will remain the key talking point this week, but it will be wise to keep a close eye on other assets linked to its economy.

For instance, oil benchmarks.

Oil prices jumped over 2% this morning following the positive developments with China.

• BRENT: +2.5%

• Crude: +2.3%

Over the past few months, the global commodity has been pressured by concerns over China’s economy and prospects of increased supplies from OPEC+. But this latest news regarding China’s stimulus could boost confidence in the country’s economic outlook, supporting oil as a result.

Note: China is one of the largest energy consumers in the world.

Oil markets could see more volatility today depending on how markets react to OPEC’s annual world oil outlook and ongoing geopolitical developments.

Looking at the technicals, Brent is pushing higher on the daily charts. A solid breakout above $75 may encourage an incline toward $76.90 – where the 50-day SMA resides.

 

In the FX space, keep an eye on the Australian Dollar.

The Aussie has appreciated against most G10 currencies since the start of September.

With the Reserve Bank of Australia (RBA) leaving interest rates unchanged and still sounding hawkish, this could keep the AUD supported.

Traders are currently pricing in a 55% probability of a 25-basis point RBA cut by the end of 2024.

It is worth keeping in mind that the recent developments in China could influence the Aussie – considering how China is Australia’s biggest trading partner.

Note: Australia August CPI will be published on Wednesday.

Looking at the charts, the AUDUSD hit a fresh 2024 high today with prices trading out of its weekly range.

• Should the upside momentum hold, this may push prices toward the 200-week SMA at 0.6960.

• A move back under 0.6800 could encourage a decline toward 0.6650.

Bloomberg FX model – 74% probability AUDUSD trades between 0.6757 – 0.6933 over next one week period

China AUDUSD CHINAH CN50 Brent Crude