Markets have been lulled into a false sense of calm and are unprepared for the potential impact of a seismic shift in Chinese economic policy, according to Saxo Bank chief economist Steen Jakobsen.
Markets have been lulled into a false sense of calm and are unprepared for the impact of a seismic shift in Chinese economic policy, according to Saxo Bank chief economist Steen Jakobsen.
The world's second-largest economy exceeded expectations to grow by 6.4% in the first quarter from the same period in 2018. Jakobsen suggested in an emailed note Thursday that China's change in focus from economic support to structural reform will result in a fade in outperformance of Chinese stocks, with the U.S. dollar and U.S. yields breaking higher.
"We are now entering 'the false stabilization', where policymakers go from stimulus to autopilot. This coincides with massive momentum divergence signals in China and also in U.S. stock markets, which of course make us sit up and take notice even more."
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