After the surprise move by the People’s Bank of China last week to inject liquidity into money markets in China, the question facing many allocators with exposure to equity markets there is how far Beijing is willing to stretch monetary policy. As the nation’s central bankers indicate a willingness to prop up the value of financial assets in emulation of their counterparts in the primary developed world economies, gone is the hard versus soft landing debate. Some analysts, including Barclays strategist Dennis Tan, believe that the PBOC has only just begun. “We believe that further policy support is needed in China,” he wrote in a note released this morning, “and forecast another two 25-basis-point cuts in interest rates and three 50-basis-point cuts in the required rate of return by the end of the first half of 2015.” For now at least, it seems that the global rally sending equity markets to record highs looks poised to continue, as more action from the PBOC is priced into expectations.
Japan stays on target. During his speech today in Nagoya, Bank of Japan governor Haruhiko Kuroda reiterated the bank’s commitment to driving inflation to the 2 percent target set by policymakers. Minutes from the October 31 meeting of the policy board showed some signals of division, however, as one member questioned the potential pitfalls of further yen depreciation.
U.S. consumer indicators scheduled for release. In advance of the holiday break this week, a number of primary economic data points will be released in the U.S. today including Conference Board consumer confidence and Case-Shiller home price measures for September. Revised third-quarter GDP figures will be announced with consensus forecasts for a marginal moderation from the initially anticipated, annualized 3.5 percent rate.
Base metals under pressure. Despite recent PBOC easing actions, the impact of weakening activity measures in China continue to reverberate through commodities markets, with spot prices for multiple metals reaching multiyear lows in recent sessions. Executives for Chilean copper producer Coldelco forecast a 5 percent reduction in total shipments of the metal for next year on the back of slackening Chinese demand.
FINRA fines Citi. The Financial Industry Regulatory Authority announced sanctions yesterday against Citigroup relating to disclosures made by some of the bank’s equity research analysts at client dinners in years past. The so-called idea dinners were forums for discussions that included nonpublic information, the regulator concluded after investigations.
The Bundesbank weighs in. In a speech yesterday Jens Weidmann, president of the Bundesbank, Germany’s central bank, reiterated concerns that outright quantitative easing by the European Central Bank through the purchase of sovereign debt faces regulatory roadblocks under European Union law. The comments provided another indication that Germany may challenge any attempt by ECB president Mario Draghi to increase the EU’s monetary base.
