China stimulus boosts stocks, but crypto remains stagnant
Quick Take
- China’s stimulus lifted global stock indices but failed to shake the cryptocurrency market out of its current stagnation.
- Meanwhile, QCP Capital analysts suggest that recent monetary easing in both China and the U.S. could provide near-term support, with market participants expecting an upward move in ether.
China’s broad monetary stimulus package, announced on Tuesday, injected optimism into European and U.S. equity markets, though it had little impact on the cryptocurrency sector, which remained relatively stagnant over the past 24 hours.
However, QCP Capital analysts noted that China’s aggressive monetary measures, coupled with the U.S. Federal Reserve's recent 50-basis-point rate cut, point to a global trend of easing that may support risk assets, including cryptocurrencies, in the near future.
In the context of this easing, QCP Capital highlighted growing positive sentiment toward ether in the derivatives market. Specifically, they observed a shift in ether options, where the front-end skew has moved from puts to calls, indicating expectations of an upward price movement. "Ether implied volatility is also trading 9% higher than bitcoin, suggesting both upside sentiment and higher expected volatility," they added.
China’s monetary easing and global market impact
On the macroeconomic front, China’s stimulus measures, designed to lower borrowing costs and boost economic activity, included cutting interest rates on existing mortgages by 0.5 percentage points and reducing the reserve requirements for banks, allowing them to lend more. These actions were complemented by steps to ease restrictions on borrowing to invest in stocks, which sent the Shanghai Composite Index soaring by more than 4% on Tuesday to close at 2,863.13 points.
The People’s Bank of China (PBoC) Governor, Pan Gongsheng, emphasized that these efforts aim to stimulate domestic demand and financial markets, bolstering investor confidence. As a result, global commodity prices, including Brent crude and copper, surged, with Brent crude rising more than 1.4% to nearly $74.28 a barrel, as of the time of writing.
European and U.S. equities rallied, with sectors linked to the Chinese economy seeing notable gains as China's stimulus fueled widespread risk-on sentiment. In London, the FTSE 100 closed up 0.28%, while the STOXX Europe 600 rose 0.65%. In the U.S., the S&P 500 gained 0.21%, the Dow Jones edged up 0.01%, and the Nasdaq advanced 0.55% in early trading.
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