US/China trade talks to begin:
PBOC rate cuts:
Other:
India/Pakistan conflict:
Other
It was an eventful day in Asia today with two nuclear powers
exchanging fire, a beginning to US/China talks scheduled, and rate
cuts/further supportive measures from the People’s Bank of China
and other Chinese authorities.
FX rates swing
around in response, as did gold and equities.
- India-Pakistan
tensions escalate after cross-border strikes. India and Pakistan are both nuclear powers.India carried
out strikes on nine sites in Pakistan and Pakistan-administered
Kashmir early Wednesday, describing the taregts as “terrorist
infrastructure” used to plan and direct attacks. Indian authorities
stressed the operation was “focused, measured, and non-escalatory,”
adding that no Pakistani military assets were hit. - Pakistan responded
with artillery, resulting in both sides exchanging heavy fire along
the Line of Control that separates Pakistan-administered Kashmir from
Indian-administered Kashmir -
India’s strikes follow
weeks of intensifying hostilities after a deadly assault in the town
of Pahalgam on April 22, where 26 civilians — mostly Hindu men —
were killed by militants. It was the worst attack on civilians in the
region in 20 years.
U.S. and China to
(finally) begin high-level trade talks
-
The United States
and China will hold formal trade negotiations this weekend in Geneva,
their first high-level engagement since the eruption of a fresh
tariff-driven trade conflict. China’s Ministry of Commerce
confirmed Vice Premier He Lifeng will meet with U.S. Treasury
Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer,
in what both sides are framing as a critical effort to de-escalate
tensions. -
Treasury Secretary Bessent said the talks aim to
address “shared interests” and called current tariff levels
“unsustainable,” while rejecting the notion of decoupling. “What
we want is fair trade,” he said, noting that the world has been
engaging with the U.S., but “China has been the missing piece.”
The USTR added that Greer will engage directly with his Chinese
counterpart to discuss paths forward on trade. -
China, for
its part, said it agreed to the meeting after “repeated” outreach
from Washington and following consultations with its domestic
stakeholders. The Commerce Ministry emphasised that the talks must be
conducted on equal footing and warned it would not tolerate coercion
or double-dealing. The ministry also expressed concern that other
nations in ongoing trade discussions with the U.S. might coordinate
tariff measures against China, adding a strategic layer to Beijing’s
decision to engage.
- Bessent tempered
expectations, saying that the two sides have agreed to talk. The plan
is that on Saturday and Sunday, we’ll agree on what we’re going
to talk about. Bessent added that this initial meeting will be about
de-escalation.
People’s Bank of China rate cuts
- Then it was over to China, where a joint briefing by officials from the
People’s Bank of China, the National Financial Regulatory
Administration and the China Securities Regulatory Commission. The
officials included PBOC Governor Pan.
I
posted a bit of a summary of the measures, repeating that here, but
there is more detail in the posts above.
Equity
Market Stabilisation:
-
Central
Huijin, along with the PBOC, will step in as a quasi-stabilisation
fund to help maintain stock market confidence. -
An
additional 60 billion yuan (US$8.3 billion) from long-term insurance
funds will be channelled into equities under an expanded pilot
program.
Targeted
Liquidity and Credit Support:
-
RMB
300 billion in new re-lending funds will be allocated to support
technological innovation and industrial upgrades. -
A
new RMB 500 billion re-lending facility will be introduced to
finance elderly care infrastructure and broader service consumption. -
The
People’s Bank of China (PBOC) will expand the quota for capital
market support tools to RMB 800 billion to deepen market-based
financing. -
A
new risk-sharing mechanism will be established to back technology
innovation bonds, improving credit support for strategic sectors.
Monetary
Tools and Interest Rate Adjustments from the People’s Bank of China:
-
The
Reserve Requirement Ratio (RRR) will be lowered by 0.5 percentage
points to boost banking system liquidity. -
A
temporary cut in the reserve ratio for auto finance and leasing
firms will bring it down from 5% to 0%, aiming to ease
sector-specific funding constraints. -
The
7-day Reverse Repo rate, a key short-term policy rate, will be
trimmed by 10 basis points to 1.4%. -
The
structural monetary policy rate will be reduced by 25 basis points
to support targeted credit expansion. -
Interest
rates on individual housing provident fund loans will be lowered by
0.25 percentage points to reduce mortgage borrowing costs. -
The
Standing Lending Facility (SLF) rate will be cut by 10 basis points,
further easing interbank lending conditions.
—
Gold
continued its Tuesday swing higher, getting to above US$3430. It
wobbled around that level and down just a touch on the news of the
India/Pakistan fighting. When news subsequently broke of the
Bessent/Greer/He meeting ahead gold sold of heavily to lows circa
US$3360 before stabilising.
Major
FX was a little less wild. The USD broadly gained on the trade talk
meeting news. AUD/USD was an exception, the Australian dollar found
bids on China hopes. After topping above 0.6510 its subsided back
below 0.6490 though.
USD/JPY is 100 points higher on the trade talk news.
US
equity index futures rose on the trade talk news, these have
stabilised off their early highs.
ForexLive.com
is evolving into
investingLive.com, a new destination for intelligent market updates and smarter
decision-making for investors and traders alike.
