Chinese stocks extend gains on surprise rate cut

Monday, November 24, 2014

Chinese benchmark indices rallied to a three year high during overnight trading as risk appetite continued to improve after the PBOC’s surprise decision last week to cut the base rate. Both the CSI 300 and Shanghai Composite experienced firm buying activity throughout the session, adding 2.55% and 1.85% respectively after central bankers cut the 1 year lending rate to 5.6% from 6.0%. Recent buying pressure across the commodities complex suggests the immediate response among market participants has been positive, however, previous rate cuts have been followed by extended periods of subdued performance across risk assets as Beijing struggles to halt the gradual slowdown in economic growth.

Front month Brent futures managed to build on Thursday’s gains, rallying for a second day on Friday as the global crude benchmark closed above $80/bbl for the first time in a week and a half. Subdued trading activity during the second half of November had seen losses extend below $77/bbl at one point, with a fresh year-to-date low of $76.76/bbl recorded on the 14th. Intraday moves on Friday saw Brent test levels towards $81.61/bbl, however, these gains were short lived despite support at $80/bbl holding firm. Activity early this morning looks to extend the positive moves seen towards the end of last week as investors position themselves ahead of OPEC’s meeting in Vienna later on this week. Prices have found support around Friday’s close and with speculation among investors that Iranian oil minister, Bijan Namdar Zanganeh may propose a 1m bpd production cut to OPEC members to Saudi Arabia’s vocal oil minister, Ali Al-Naimi we could see further upside potential in the coming sessions.

Spot gold prices edged higher on Friday adding 0.65% on stable investment demand as participants took advantage of the recent rout in prices which had seen the yellow metal fall back below $1,150/oz earlier this month, at one stage trading at a fresh year-to-date low towards $1,132/oz. Intraday gains on Friday struggled to breach tentative resistance at the 50 day MA and investors struggled to find the impetus for any protracted gains given the unchanged fundamental outlook. After posting gains for a third consecutive week last week, spot prices have started the last week of November on the back foot with prices trading below $1,200/oz early on this morning.

China's CSI 300 rallies overnight in a strong start to the week

SHSZ300 Index Shanghai Shenzhen 2014 11 24 07 28 26

Spot gold prices slip back below $1,200/oz early on

XAU Curncy Gold Spot Oz D 2014 11 24 07 47 48

Events for today

JP Market Holiday 




Ifo Business Climate




Chicago Fed




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