Talking Points:

China announced an easing measure of double interest rate cuts late on Friday. 1-year lending rate was cut to 4.35% from 4.6% and reserve requirement ratio (RRR) to 17.5% from 18%. It also removed the ceiling for banks’ deposit rate. The move echoed European Central Bank’s hints of stimulus expansion last week and likely precedes chain reaction among other central banks: Bank of Japan, Reserve Bank of Australia, Swiss National Bank.

US dollar jumped after the event, inadvertently crashed commodities prices. Perception of China stimulus as a sign of slower manufacturing growth also hurt demand prospects. Although market sentiment reversed to risk-on in Asia trade, commodities have not recovered.

Gold lowered modestlyafterthe news of China’s easing. Continual easing actions by the world’s central banks should provide reasonable support to gold as a store of value and as competition loosens from interest-yielding assets.

Copper continued to weaken even as Asia market loaded on risk assets. While copper on Shanghai Future Exchange roughly stabilized above a two-day low, copper on NYMEX plunged close to the lowest since October 8 at 2.3305. Copper will likely stay weak due to mixed interpretations whether China’s easing is good for growth or it is an outward sign of slowdown.

Oil tumbled below 45 to a new 4-week low on Friday and stabilized in the proximity amid risk of a supply glut. US drillers only dropped 1 active rigs last week, according to Baker Hughes. This added to oversupply threat after EIA’s data showed US stockpiles have consistently increased since September 18.