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Morgan Stanley has increased its 2025 economic growth forecast for China to 4.5%, citing a stronger starting point and robust capital expenditure. However, growth is expected to slow from Q2 due to US tariffs and countermeasures. The bank also predicts the yuan will trade at 7.35 against the dollar by mid-2025, ending the year at 7.50, reflecting the People's Bank of China's focus on currency stability.
Central banks are in focus today, with the Bank of England expected to maintain its rate at 4.50%, while the Swiss National Bank may cut its rate to 0.25%. The Riksbank is anticipated to hold steady at 2.25%, with a dovish outlook possible. In the US, the Fed's recent meeting resulted in unchanged rates, leading to lower rates and a weaker USD, while global equities rose, particularly in the US.
China's anticipated interest rate cuts and economic stimulus in 2025 could drive liquidity into Bitcoin, potentially triggering a price breakout. As capital flees China amid economic instability, demand for Bitcoin may rise as a safer asset. Additionally, U.S. policy shifts under the Trump administration could further enhance Bitcoin's momentum, positioning it as a key player in the global financial landscape.
Markets experienced turmoil following the Federal Reserve's indication of fewer rate cuts in 2025, strengthening the dollar and prompting global central banks to reconsider their policies. While the S&P 500 and Nasdaq fell slightly, the Dow broke a 10-day losing streak, suggesting mixed investor sentiment amid heightened volatility. The upcoming U.S. personal consumption expenditures price index is expected to significantly influence market reactions.
China's regulators are intensifying efforts to stabilize the housing and stock markets, following a meeting of top leaders that emphasized the need for greater stimulus. Measures will include boosting property market demand, enhancing market monitoring, and implementing more effective fiscal policies.The government plans to raise the fiscal deficit target and prioritize lifting consumption to stimulate domestic demand. Despite recent signs of economic recovery, overall confidence remains low, with credit expansion unexpectedly slowing in November, prompting expectations of further monetary easing.
China's central bank resumed its gold purchases in November after a six-month hiatus, acquiring 160,000 fine troy ounces to bring its total reserves to 72.96 million fine troy ounces. This move follows a period of consistent buying that lasted 18 months until April, contributing to the rise in gold prices.
The dollar strengthened after President-elect Donald Trump announced plans for additional tariffs on Mexico, Canada, and China, disrupting expectations for a more moderate economic approach. The Bloomberg Dollar Spot Index rose by 0.4%, while the Canadian dollar and Mexican peso fell significantly, with the latter dropping over 2%. In response to the dollar's rise, the People's Bank of China intervened to support the yuan by setting a stronger daily fixing than anticipated.
China's central bank has decided to keep the one-year medium-term lending facility rate steady at 2% for the second consecutive month, following a cut in September. This decision aligns with the forecasts of all 14 economists surveyed, indicating a cautious approach to monetary stimulus.
Chinese banks have maintained their benchmark lending rates after a significant reduction last month. The one-year loan prime rate remains at 3.10%, while the five-year rate is steady at 3.60%, as confirmed by the People"s Bank of China. This decision aligns with economists" expectations.
Howard Marks, co-chairman of Oaktree Capital, expressed cautious optimism about China"s economy, highlighting the country"s growth target of around 5% for 2024 as a significant challenge. Despite the modest target compared to historical rates, Marks noted it remains above average globally, emphasizing the difficulties posed by sluggish consumer spending, a struggling property market, and an aging population. He acknowledged recent stimulus measures but warned that sustained economic growth cannot rely solely on such interventions.
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