Beijing Pulls Out All the Stops – By Reuters

Market Outlook: Key Events Ahead

As we reflect on the recent developments in Beijing, it’s been a significant week for China’s economy.

The country’s leadership appears to be acknowledging the challenges of a slowing economy and has responded with measures that align with market expectations. These include cuts to the reserve requirement ratio (RRR), interest rate reductions, initiatives to support the stock market, and increased fiscal support.

Chinese stock markets, which have faced difficulties in recent times, are experiencing a rebound and are on track for their best weekly performance since 2008, with blue-chip stocks rising by 3.6% on Friday and posting a 15% gain for the week. Hong Kong’s market is set for nearly a 13% weekly increase, marking its largest rise since 1998.

This positive momentum extends to various markets linked to China. An index of mainland property stocks surged by 20% this week, and commodities also saw significant gains. Iron ore prices exceeded $100 per metric ton, while copper prices surpassed $10,000 per ton. Additionally, gold reached a new high, and silver hit a 12-year peak.

Whether this rally can be sustained remains uncertain. Historically, China’s A-share market has often disappointed investors, with the benchmark CSI300 now where it was in 2007, in stark contrast to other markets that have risen nearly 300% during the same period.

With the China markets closing for a week-long public holiday, investors will be watching closely to see if consumer spending picks up to help drive economic recovery.

As the week comes to a close, several key events are on the horizon for investors. Japan’s ruling party is currently holding a leadership election that is proving to be unpredictable. The yen has been volatile, reaching a three-week low of 145.56 per dollar on Friday.

Among the candidates is Sanae Takaichi, who has suggested that the Bank of Japan raised rates too early. If she emerges victorious, the yen may weaken further if the markets begin to factor in reduced chances for another rate hike this year, which is currently assessed at around 30%.

The results from the first round of voting within the Liberal Democratic Party are anticipated around 14:20 JST, followed by a likely run-off between the top two candidates around 15:30 JST.

Additionally, the U.S. will release its core personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred measure of inflation. Predictions suggest a modest monthly increase of 0.2%, although there may be risks to the downside.

A favorable reading could set the stage for a significant half-point interest rate cut from the Fed in November, but the outcome will largely hinge on the forthcoming payrolls report next week.

Key Developments to Monitor:

• Japanese leadership election
• France’s Consumer Price Index for September and Germany’s unemployment rate
• U.S. PCE data

(Analysis by Stella Qiu; Edited by Edmund Klamann)