(Updates below for Mar 7)
It’s been a fun few weeks since we had that “OMG” days of market falls. As I’ve mentioned here in the blog, market will recover as we see signs that governments will be supporting their economies to grow and ward off deflation. The quarter is down to the last month though, so given earnings already reported the seasonal tendency for profit-taking will kick in. I would be taking less bullish position, maybe some small ones and if you read around that the trading volumes are getting thinner, it means there are less participants pushing up prices. The Chinese government’s 5 year plan will likely be out next week. Then there is one other big moment for government stimulus announcements which will happen on March 16-17 – the US Fed would be raising rates or not.
There is still some optimism in the air, definitely need to be enjoyed. I note China’s credit rating has been cut — a sign of weakness. But beware the issues still persisting and reversal could happen fairly quickly.
— China’s Growth Policies —
(Update Mar 7)
OK now it’s official, China is slowing down, more than what we already know. The government, for the first time has given a “range target” for growth which is 6.5 to 7% and the stimulus so-far announced (nothing earth-shaking it seems) has not been given the seal of approval by investors.
Apart from China we will be looking at ECB stimulus announcement this week. Nothing to be excited about according to news articles because “You have the ECB policy which is generally going to be cutting rates, expanding QE and that tends to weaken the euro”. The jury is still out about cutting rates to negative and the recent run in oil prices is going to put some price / inflation pressures so there is a need for careful decision-making here.
Add to that some Fed officials are going to be making public speeches this week, Stanley Fischer US Fed Vice-Chair, and whatever he says will definitely be weighed against a rate cut becoming a possibility.
So plenty of volatility expected, I think we will have braking bulls this week.
http://www.bloomberg.com/news/articles/2016-03-06/aussie-slips-after-china-growth-goal-cut-asia-futures-tip-gains
http://www.bloomberg.com/news/articles/2016-03-07/china-s-foreign-reserves-slow-decline-as-currency-stabilizes
