China’s State Council released a “special action plan” to enhance domestic consumption, featuring 30 measures aimed at increasing household incomes and reducing financial burdens. Additional support for the property market was provided as Shenzhen eased housing finance rules, while import licenses for US beef, pork, and chicken worth $3-5 billion were not renewed.
Data from January to February showed retail sales and industrial output grew; however, unemployment rose and property investment remained weak. New home prices dropped by 4.8% in February, marginally better than the 5.0% decline of the previous month.
Us Market Sentiment
In the US, Treasury Secretary Bessent commented on falling stock prices, framing it as a healthy correction and hinted at the potential for a recession. This contributed to a cautious market sentiment, where US equity index futures opened lower.
Market reactions included a spike in oil prices that later moderated, primarily due to Middle East tensions. The USD/JPY currency pair experienced a 40-point fluctuation, with limited yen-specific news, while other major currencies remained stable, with the AUD struggling despite China’s consumption plan.
The recent directives from the State Council indicate a structured attempt to support domestic demand by targeting incomes and financial pressures faced by households. The policy adjustments in Shenzhen reinforce this, as housing affordability measures are expected to alleviate some pressure on buyers. However, the decision to let import licenses for key US agricultural products expire suggests a more selective approach to external supply dependency. This could, over time, change dynamics in agricultural trade and inflation expectations.
The economic figures from the first two months of the year underline a mixed performance. Retail sales and industrial activity displayed growth, but this was tempered by rising unemployment and continued weakness in real estate investment. The softer decline in new home prices offers a slight reprieve compared to January, yet it remains uncertain whether this is the beginning of a stabilisation trend or a temporary slowdown in the decline. Given how critical property remains to overall economic momentum, market participants will likely focus on any further policy responses aimed at bolstering housing demand.
Market And Currency Movements
Across the Pacific, Bessent’s remarks regarding stock market weakness suggest an acceptance that valuations may need to reset lower. By referencing a possible recession, the Treasury Secretary’s comments added to an already cautious outlook, pressuring equity sentiment. With futures contracts opening on a weaker footing, risk aversion remains visible.
In commodities, oil prices initially surged before moderating, reflecting ongoing geopolitical uncertainty. While fundamental supply and demand factors remain in play, traders reacted to the latest developments in the Middle East, balancing volatility with expectations of potential production responses. Meanwhile, the fluctuations in USD/JPY were notable, albeit not driven by yen-specific catalysts, reinforcing a broader theme of a relentless focus on US monetary trends. Other majors mostly held firm, though the Australian dollar failed to draw sustained support from China’s efforts to stimulate spending, which may point to scepticism over the near-term effectiveness of those measures.
Looking ahead, we will continue monitoring how these elements develop. The disconnect between economic support policies and actual improvements in data remains a central consideration. The reluctance of markets to position aggressively on positive headlines suggests lingering caution. While some sectors appear responsive, others show hesitation, reflecting deeper concerns about the sustainability of growth-focused measures.
