Finimize - 📈 China's biggest rally in four years

What’s going on here?

The People’s Bank of China (PBOC) announced plans to puff up the country’s property sector and stock market, leading to China’s biggest stock market rally in four years.

What does this mean?

China’s flailing property market has been a real drag on the economy. So to help, the PBOC is cutting rates on individual borrowers’ existing mortgages by an average of 0.5 percentage points and lowering the minimum down payment for second homes from 25% to 15%. The central bank is also reducing the amount of money that banks must hold in reserve, a bid to encourage them to hand out more loans. And to top it all off, the PBOC is supporting the stock market with $113 billion to help certain companies buy stocks and others afford share buybacks. That combination of measures is a lot, sure, but it still may not be enough to fix up China’s dilapidated housing market.

Why should I care?

For markets: Everything comes back into fashion, eventually.

Investors have been fleeing China’s stock markets, spooked by the sluggish economy – a problem that’ll only worsen if the country’s prices continue to fall. In fact, expectations are so low that news of the support was enough to lift investors’ spirits and, in turn, the stock market. China’s CSI 300 Index picked up by 4.3% on Tuesday, marking its best day since July 2020 – although it’s still lost about a third of its value from three years ago.

The bigger picture: When China sneezes… Well, you know the rest.

Australian mining companies have seen their share prices sink with China buying fewer commodities. And European luxury brands and car companies have suffered a similar fate, as Chinese customers have tightened their purse strings. The country’s even pushed oil prices down a few notches: China guzzles up 13% of the world’s supply, so its pullback has left a lot of the slippery stuff on the shelf.

What’s going on here?

The US climate plan has been impacted by delays and political pressure, and the upcoming election could derail it completely.

What does this mean?

The high cost of living right now means both businesses and regular folk are reluctant to pay extra cash for cleaner power. Not that there’s much to go around, anyway: renewable energy capacity is growing faster than expected, but greedy AI-focused data centers are claiming first dibs on most of it. That’s forcing utility companies to keep burning fossil fuels, while politicians – made more uncomfortable by heat from potential voters than by climate change – are backing out of previous pledges. And that’s already impacting the country: New York state’s bold plan to get 70% of its electricity from renewables by 2030 has been compromised by permit delays and scrapped projects.

Why should I care?

For markets: Forget about “All for one and one for all”.

The world is making progress overall, at least: over 40% of global electricity came from low-carbon sources last year. China has scrubbed up the most, accounting for more than a third of all wind and solar power usage last year and dominating the EV market. But rather than work together, the US is focused on building green infrastructure on American soil. The country made that priority clear by slapping 100% tariffs on Chinese EVs. That said, depending on the outcome of the election, US climate spending pledges could very well end up in the trash.

The bigger picture: Time to clean up.

The Federal Reserve’s interest rate cut has reignited investors’ interest in clean tech. The industry relies on experimental technology and uncertain demand – and investors weren’t exactly eager to back businesses without proven profit in a high rate environment. But now that US interest rates are on their way back down, making borrowing more affordable, investors might be warming up to riskier clean tech startups.