Elsewhere
The People's Bank of China (PBoC) held its policy rate steady this Monday - defying the expectation of a 10bp cut - while pumping more cash into the financial system to reverse the selloff and boost asset prices, and eventually growth. But in vain. The Chinese CSI 300 index barely reacted to the news after China posted a third negative CPI read on a yearly basis. China is still expected to hit its official 5% target this year, but the confidence crisis and the slump in property prices are not going to reverse overnight. Outlook for Chinese equities is not bright.
Taiwan's stock exchange, on the other hand, which diverged positively from the mainland stocks last year, had a cheery start to the week after the ruling DPP's Lai – who is pointed at as a 'separatist' by Beijing - won presidency and his party lost its legislative majority. The latter was seen as a good compromise for relations between China and Taiwan – as the outcome was clearly not over-provocative for Beijing. The Japanese Nikkei 225, on the other hand, hit the 36K mark on the back of a softer yen, and waning expectations that the BoJ will be normalizing at a decent speed this year.
In the FX, the US dollar kicks off the week on a slightly negative note, the AUDUSD struggles to find buyers near the lower bound of its October to now ascending channel, as the PBoC could've been more supportive. The EURUSD couldn't clear the 1.10 resistance last week, and the failure to break above the crucial psychological could weaken the euro bulls' hands this week. Across the Channel, Cable remains cautiously bid after Friday's GDP printed a better-than-expected growth number. The UK will release its latest inflation report on Wednesday. UK inflation is expected to have further eased from 3.9% to 3.8% in December, and core inflation is seen slipping below the 5% mark. A softer-than-expected set of inflation figures could prevent Cable from making a sustainable move above the 1.28 level.
