Morning Bid: China clouds darken market mood

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Morning Bid: China clouds darken market mood

Broadly speaking, the global backdrop for Asian markets is still bright, with investors confident that the Fed will soon cut U.S. interest rates keeping the dollar, bond yields and volatility in check, and boosting risk assets.The economic "data dump" from Beijing on Friday showed that China's recovery is sputtering - investment growth slowed, retail sales expanded at the slowest pace since late 2022, and new home prices fell at the fastest rate in nine years.

Renewed concern over China's growth raises the question of how Beijing will finance its fiscal support measures in the long term. China is sitting on more than $3 trillion of FX reserves. Is now the time for China to dip into that rainy day fund to prevent the property sector bust from bringing down the wider economy?

That said, financial markets are enjoying a period of remarkable calm right now. Global FX volatility is the lowest in five weeks, U.S. Treasury market volatility is at a six-week low, and theThis low volatility environment is helping to lift U.S., European and other stock markets to all-time highs.

 

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