Positive sentiment percolates as Evergrande news reevaluated
There was a hiccup in sentiment after a WSJ report that Chinese officials had told local governments to be prepared in case of a demise of Evergrande.
After the initial dip, the market may be taking the view that Chinese officials are prepared and will ensure it's orderly, which is all the market wants to see. Further, the most-important part of the report may be a sign that China will loosen the property market, at least in smaller cities:
Policy makers are also considering gradually easing some property curbs in smaller Chinese cities, such as making ownership of a second home easier, according to one of the people. They could also moderate some of the stringent deleveraging measures on property developers that helped push heavily indebted Evergrande toward the precipice in recent months, this person said.
So there's a combination of an orderly downfall of Evergrande and a boost to property markets. There's also talk of a boost in Chinese fiscal spending to cushion any blow.
As for AUD/USD, if it can get through the Fed high, it could start a retracement phase after a long decline to 0.7230 from 0.7478 at the start of the month.
