Deflation Incoming: Xi Panics

The Chinese Government and the PBoC finally panicked and produced a massive stimulus package to save stock markets and real estate from tanking further. And there has to be more fiscal stimulus to come.

This is the biggest financial event since the GFC, and if China saved the world in 2008/9, who is going to save China now?

• Not the US as both parties look for a trade war with China
• Not Europe as it's deep in financial trouble itself. And feeling the effects of EV's and steel being dumped by Chinese companies

Only a global reset or the BRICs countries coming up with different financial system could make a difference.

Maybe China took the opportunity to sell it's US Treasuries as part of the stimulus package?

Breaking

In a First, Japan Fires Flares Against Russian Military Aircraft

Swiss National Bank hints at further rate cuts after latest reduction[Reuters]

Goldman Commodity Traders: Gold Buying On Our Desk Has Been Relentless, And Silver Is Starting To Move Too[Zerohedge]

In Focus

China

China's economic blitz had the immediate desired effect on local stock markets. Incentivising companies to buy back their own shares would definitely have this effect !

The Yuan strengthening was a clear sign of foreigners piling in.

Yet more interest rate cuts were announced

• 7 day repo rate by 0.2%
• Medium term lending rate by 30bps
• Loan prime rates 20-25 bps

Deflation is real in China and if inflation is scary, deflation can be truly terrifying. Deflation [Wikipedia]

China lifts markets with promise of more support for economy[FT]

China's 10-Year Bond Yield Falls to 2% for First Time on Record [Bloomberg]

China Politburo Vows to Steady Housing Market, Up Fiscal Support [Bloomberg]

China must act on deflation, former central bank governor warns [FT]

China will cut reserve requirement ratio by 50 basis points, PBOC chief says[CNBC]

China Urges Local Companies to Stay Away From Nvidia’s Chips[Bloomberg]

Hong Kong’s Biggest Developer Sells New Homes at 20% Discount[Bloomberg]

Japan

As all eyes move to China, Tokyo CPI came in lower than expected which didn't help BoJ's Governor Ueda's desire to hike rates.?

Bets Back on for BOJ Hikes After Ishiba’s LDP Win, Analysts Say[Bloomberg]

BOJ governor Ueda says unwinding of speculative yen positions has likely run its course

US Economy

Still a mixed bag in the US. Markets are pricing in multiple rate cuts and they may be disappointed.

Fed’s Neel Kashkari Expects Two Quarter-Point Cuts Before Year’s End[Bloomberg] He's not a voting member now.

Fed’s high-rates era handed $1tn windfall to US banks[FT]

Hooters Restaurant Chain Seeks Debt Advice as Business Falters[Bloomberg]

Eric Adams Is Indicted After Federal Corruption Investigation[NY Times]

In The Background

CRE / Banks / CLOs

More CRE pain and more property tax increases on the way as insolvent countries, states and municipalities finally work out that whilst tax payers may move jurisdiction, land can't.

$80mm Houston office loan goes to special servicer after tenant vacates.[X]

Will Boston homeowners be on the hook for city's budget problem? Wu hopes not[NBC10Boston]

Canada

Canada's yield curve finally prices in the 3 rate cuts and a recession coming. With stagnant GDP and rising wage inflation, stagflation looks the likely outcome.

England

Tough times for the new labour government as rumours of Starmer's forced departure circulate and markets prepare for the tax grab by Rachel Reeves.

ISG collapse 'devastating' for construction industry[BBC]

Nationwide allows first-time buyers to borrow 6 times earnings [FT]?

UK’s Shoplifting Crisis Costs Food Retailer Co-Op ￡40 Million[Bloomberg]

Europe

A renaissance is happening in Europe as economically strong countries become weak and the previously weak ones strong.

• French bonds now yield more than Spanish bonds [Reuters]
• Greek bonds yield less than US Treasuries

Steelmakers vocal as China floods market.?European prices drop below cost of production as world market is deluged.

European steelmakers plead with Brussels to tackle flood of Chinese exports[FT]

Australia

RBA holds

The RBA is so busy fighting the Government and the ASX, that it's ignoring the deflationary wave engulfing the world.

Even with much lower, but expected, CPI indicator, rate cuts are off the table. Yet another policy mistake.

RBA issues scathing assessment of ASX’s derivatives upgrade[AFR]

RBA Warns That Australia Mega-Pensions Pose Risks to Stability[Bloomberg]

What's Next ?

With China off most of the week, Nonfarm Payroll will be the market focus.?

Look for the Chinese rate cuts effects to wane and economic reality sets in.

This Week's Important Economic Indicators [London time]