Asian stocks survived Wall Street's stumble unscathed and rose sharply on Thursday, fueled by renewed optimism about China's stimulus plan. It seems China may not have the funds to spare yet, with reports circulating of a hefty $142 billion injection of funds for the biggest banks. This latest move pushed Asian markets back into positive territory, even though U.S. markets had a more cautious, wait-and-see day. Futures are recovering somewhat in the U.S., but traders are still hungry for fresh fuel after the Fed's rate cut last week.
China's domestic “shock and fear” package has not rocked the world stage like it once did, suggesting that Chinese stimulus is not having the same impact in today's more politically fragmented world. Now all eyes are on Fed Chair Jerome Powell's upcoming speech, with traders eagerly hoping for dovish signals as Friday's U.S. price data takes center stage.
To add a little spice to the matter, Fed Governor Waller, who has become something of a weather vane for the markets, justified the latest 50 basis point cut by noting that core PCE was below target. If inflation falls below target again, a 50 basis point cut could be on the cards in November. Such a move would likely boost stocks, drag down bond yields and trigger a dollar sell-off – which would boost all global markets in the process.
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