China’s Intervention Sends Stocks Soaring. Powell’s Unlikely to Make That Big a Splash.

The Chinese government just had the sort of impact on markets that the Federal Reserve can only dream about.

In fairness to the Fed, it hasn’t spent the best part of a year undermining the stock market through a wide-ranging regulatory crackdown as Beijing has.

Nonetheless the intervention from China and the ensuing moves in Chinese stocks Wednesday are pretty seismic.

China promised to keep its stock markets stable and implement measures to boost its economy, according to a state-run media report of a meeting of the country’s financial stability and development committee. The committee also stressed that regulators should “actively introduce market-friendly policies.”

Significantly for U.S. investors, the committee said China continues to support companies’ listing of shares overseas and has maintained “good communications” with U.S. regulators, with a cooperation plan in the works. That’s quite the development – just last week the Securities and Exchange Commission named five Chinese companies that could face delisting.

So what’s changed? The pressure on Chinese stocks had ramped up in the past week as regulatory concerns returned and surging Covid cases led Beijing to lock down millions of people. The country’s links to Russia also spooked investors as U.S. officials said the Russian government has asked China for military aid. If it did help Russia, sanctions would surely follow.

Regardless of what’s behind it, China has abruptly changed its tune and it has sparked some huge gains, particularly among tech stocks.

Hong Kong-listed shares soared close to 30%, while the e-commerce giant’s U.S.-listed stock was 20% higher in premarket trading. It wasn’t the only one –

surged 35% in Hong Kong and

rose 20% among others.

The Fed is up next, delivering its decision on interest rates later Wednesday. A 25 basis point hike is expected but the forward guidance and Jerome Powell’s comments have the potential to move markets – just not quite as much.

Callum Keown

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The Fed’s ‘Forward Guidance’ Is Key Today

The Federal Reserve stands poised to begin lifting its short-term interest rates–likely by a quarter-point–and ending emergency bond buying. More important will be Fed Chairman Jerome Powell’s “forward guidance” on how aggressively the central bank will move to rein in surging inflation.

  • The central bank’s two-day meeting, which concludes later Wednesday, comes amid prices climbing at the fastest pace in 40 years and an uncertain geopolitical picture sparked by Russia’s invasion of Ukraine.
  • Powell recently told a House panel he expects to start interest-rate liftoff with a 0.25 percentage point increase, bringing the target rate to a range of 0.25% to 0.5%, while