Chinese property prices continue to fall

Wednesday, March 18, 2015

Chinese home prices extended their declines last month with prices for new residential apartments across 69 out of 70 major cities falling in February year-on-year while prices remained unchanged in one as the economic slowdown continued to drag the property sector lower. Prices have been in freefall since October last year despite the best efforts of policymakers in Beijing who have significantly reduced borrowing costs and removed property curbs in recent months. The weaker housing market data increased speculation among investors that Beijing would offer up additional supportive measures with the potential for a further cut in interest rates, adding to last month’s decision by the PBOC to cut the 1-year benchmark interest rate by 25 basis points to 5.35%. Mainland equity indices managed to rally substantially higher, with the Shanghai Composite and CSI 300 both adding over 2% throughout the session, as investors remained hopeful that policymakers would offer further support.

Spot gold prices traded at a four month low yesterday as intraday moves briefly saw dips below $1,143/oz ahead of today’s FOMC meeting. After a brief rally on Friday, which snapped a nine day losing streak, prices resumed the sell-off on Monday, breaching $1,150/oz yesterday as investors anticipated a shift in Fed policy as they ready themselves for a rate rise. The dollar index has also contributed considerable downward pressure to gold prices as it holds firmly above 99.50 early this morning after trading above 100 towards the end of last week and beginning of this week. 

A busy session for macroeconomic updates today with the Bank of England set to publish minutes of their last MPC meeting later this morning closely followed by the eagerly anticipated final UK Budget before the elections. In what is expected to be a highly politically charged budget as the chancellor hopes to translate the better than anticipated economic recovery into tory votes, many market participants remain hopeful that the previously promised tax cuts, loosening of austerity measures and crackdown on tax avoiders will provide further support to the UK economy. Investors will remained glued to their screens throughout the day with the FOMC rate decision and accompanying statement expected after European markets close. Particular attention will be paid to any change in phrasing and terminology used by Fed policymakers which could offer additional insight into the path of an eventual increase in interest rates. 

Gold prices extend losses below $1,150/oz

XAU Curncy Gold Spot Oz D 2015 03 18 07 41 30

DXY stabilises above 99.50 ahead of FOMC decision

DXY Curncy DOLLAR INDEX SPOT 2015 03 18 07 41 17

Events for today

0130

CN

Feb

Property Prices

0930

UK

Feb

Claimant Count

0930

UK

Feb

BOE minutes

1000

EZ

Jan

Construction Output

1000

EZ

Jan

Trade Balance

1430

US

w/e

EIA Energy Stocks

1800

US

Feb

FOMC Rate Decision

Topics: US Fed, Gold, BoE, PBOC
More from: Kash Kamal