China's Premier Wen Jiabao announced that the stimulus efforts to keep the economy growing at the target rate are working.
Reuters: - Wen, who made the comments during a weekend tour of Sichuan province in southwestern China, said the economy was running at a slower, more stable pace of growth.Some of this stimulus is visible in two major financial markets.
"The economic growth rate is still within the government target range set early this year, and stabilization policies are working," Wen was quoted as saying.
1. The interest rate swap market is pricing in significant rate cuts going forward:
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| 1 year interest rate swap |
2. The currency (CNY) has been allowed to weaken further to help the exporters:
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| CNY per 1 dollar |
But thus far equity market participants don't believe that this stimulus will translate into improved corporate earnings (which would result from improved economic activity). China's equity markets are hitting new recent lows in anticipation of slower growth.
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| The Shanghai Stock Exchange Composite Index |
The three daily indicators above will be important to watch going forward to determine how much stimulus Beijing is willing to provide and whether this stimulus is expected to have a material impact on growth.
SoberLook.com
