It has been a seesaw session with U.S. stock index futures following their dramatic buying burst in the last half hour of market trading yesterday by first rising, then falling, then rising again alongside European equities both driven almost tick for tick with even the smallest move in the carry trade of choice, the USD/JPY, even as Asian shares trade near intraday highs after China’s leaders signaled they will take further steps to support growth, including widening the fiscal deficit and stimulating the housing market, to put a floor under the economy’s slowdown according to statements released at the end of the government’s Central
Economic Work Conference by the official Xinhua News Agency on Monday.

Monetary policy must be more “flexible” and fiscal policy more “forceful” as leaders create “appropriate monetary conditions for structural reforms” adding that the fiscal deficit ratio should be raised gradually, as China’s leaders signaled .

While the leadership also endorsed structural reforms and reining in China’s increasing reliance on credit, the macroeconomic policy statements indicated concern about letting the economy’s expansion slow too much.

“Although the overall cyclical policy stance is set to be ’steady’, the tone on fiscal, monetary and other policies was modestly dovish,” economists at Goldman Sachs Group Inc. led by Song Yu wrote in a note. “The more positive cyclical policy tone from this conference makes us somewhat more comfortable with our forecast of only a moderate growth deceleration in 2016.”

Of course, this latest conference promising broad reform, is nothing new and reminds us of the Politburo’s 2013 pledge to cut debt by CNY1 trillion only to unleash a 50% debt/GDP expansion in the next 2 years. And while the market admires China’s best intentions, it too has learned to ignore them.

Elsewhere, the dollar and copper both fall while gold, silver, metals, most food commodities gain. WTI gains outpace Brent to narrow spread between oil benchmarks to smallest since January.

For now, however, keep an eye on the USD/JPY and the all important 121 line, which as always must be defended to prevent a further drop in carry-trade linked equities. If the USD/JPY is unable to find a support, this post’s title need to add another “… Then Fall Again.”

Here is a snapshot of global markets:

Looking at regional markets, Asian stocks traded mixed despite the positive close on Wall St. with volumes light heading into the Christmas holiday, while there was a mild reprieve in commodity prices with Brent recovering from 11yr lows. As a result, the energy sector was one of the outperformers in the ASX 200 (-0.1%), while the Shanghai Comp (+0.3%) traded in negative territory for the majority of the session. This came after Chinese investors booked profits following yesterday’s gains and the Chinese Conference Work meeting failing to inspire positive price action the index, however, a bout of buying towards the close saw the index close in the green. Nikkei 225 (-0.2%) was flat for a bulk of the session after gains in Sharp (+9%) offset the continued weakness in Toshiba (-11 %), although price action has been subdued ahead of tomorrow’s Emperor’s Birthday holiday. 10yr JGBs traded marginally lower heading into the aforementioned holiday tomorrow, following the weaker than prior 2yr JGB auction.