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China State Council Apparatus Has Overshadowed The Run-Up To Wednesday's FOMC

ByStephen Innes
Published 03/16/2022, 05:35 AM
HSTECH
-4.55%

China State Council's verbal intervention has overshadowed the run-up to Wednesday's FOMC meeting. But even before that, US equity markets were finding a floor despite more hawkish Fed pricing. It's as if the market is fine expecting a hawkish Fed profile over the next two years, as overly dovish forecasts could diminish credibility.Having disappointed markets earlier in the week by not cutting interest rates, China's state economic policy apparatus is taking significant coordinated steps to support risk sentiment. These include State Council support for overseas listings, engaging with the US on ADRs, and perhaps most importantly, suggesting that regulation of its big tech firms will end soon. There are also promises to step-up support for the real estate sector.These announcements don't mean much individually, but collectively, they suggest policymakers won't sit idle, and that asset prices will be supported directly or indirectly. The positive impact on sentiment is best viewed through the lens of an extraordinary 18% rally in the Hang Seng TECH index at one point today.The government's economic policies (however loose) matter less when there are multi-city lockdowns. However, supporting risk sentiment is something that the state apparatus controls, and that's precisely what they are doing. 

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