Disappointment sets into the China trade once again

All the main China equity indexes and their proxies fell by 2% today as hopes for a big stimulus package were delayed.

The charts of all the main markets — including the Shanghai Comp shown here — outline an ominous series of lower highs, though the consolidation continues.

Rate cuts are likely coming and that should help but the market wants to see some stimulus for consumers and something to shore up real estate. A gloom has set in over China and its equity markets despite low valuations.

More broadly, the uncertainty about China is weighing on global growth proxies. At the start of the week, the Australian dollar tried to bounce from the lows of the year but the RBA’s dovish shift and the lack of anything concrete from China has erased the gain and left in perilously close to a one-year low.

China will aim for growth near 5% next year, at least officially, but could face big headwinds from a US trade war. That would make for a disappointing year for global growth in general.

With that, commodity prices could fall further and that could offer leeway to central banks to ease further.

This article was written by Adam Button at www.forexlive.com.