A surge of optimism has swept through global markets this year, triggering a risk-on rally that has wrong-footed many investors, but analysts warn that two looming developments could stop this bull market in its tracks.
Now, the very last thing that Powell wants to do is to repeat the mistake of the 1970s, when the US central bank eased monetary policy too quickly, which allowed inflationary pressures to pick up. The second obstacle to the rampaging bull market could become evident later this year, as it becomes clear China has once again papered over the problems in the country’s ailing property market.
At the same time, Chinese banks have been given some breathing room, with the regulator, the China Banking and Insurance Regulatory Commission, telling them they can delay collecting interest and principal payments from real estate developers for a year. And there are some signs that they are helping to stabilise property prices. China’s new home prices across 70 large and medium-sized cities fell by an average 0.25 per cent in December, the same decline as recorded in November.But many analysts are sceptical Chinese homebuyers will regain their former confidence in the “pre-sale” business model, which previously accounted for more than 80 per cent of the revenue of property developers.