Chinese Rate Hike Implications

Good day all and happy holidays,

Just wanted to check if anyone has any interesting trade ideas based on this latest surprise hike from China.

My bet would be short commodities (grains, oil) for short term, pure risk off trade

Short Gold, speculators running for the doors.

Short Aus/Eur - China connection with Australian economy, for Euro just general fear of any slowdown globally.

Possibly short S&P especially if hints of further tightening ahead come out.

All of the above pretty obvious. The light volume and general absence of big players in the market might make Monday rather unpredictable, but i think once we're in the new year, it will really hit home. Interesting days ahead regardless.

Sharing is caring, informed opinions welcomed.

Rgrds and all the best in the new year

expectations for china rate hike of 0.5 have been pretty entrenched, so these reactions may not be as big as you might think

Sydney open later today should be interesting, though...

I think you are off on the expectations.

As an example, please see one of the articles below:

http://washingtonexaminer.com/news/b...ns?category=51

All though the week, the news have been coming out that Chinese would use RRR as a tool to control inflation rather than interest rates. Or at the very least this was the interpretation of their moves. Hence the market was definitely not expecting a rise any time soon. The expectation was for a rise some time next year.

Another article along my thinking: http://ftalphaville.ft.com/blog/2010...licy-in-china/

Not to say that no one was expecting the hike...

I recall the recent increase of the Chinese banks' reserve requirements as being something of a surprise - the benchmark rate had been expected instead. Nevertheless, I don't think the expectation of a benchmark rate hike went away as a result, and, if the expectation was shifted to "next year" well - we're almost there anyway.

thin market moves can be exaggerated ones, though, so early Asian trade will be fun to watch

Don't want to be dismissive or rude, but you are either not following the news or mistaking expectations with what people say.

Also, stating that due to illiquid market conditions we could see wild moves, really does not add anything to the topic, this way you can't be proven wrong, if it moves you can just say it's due to market conditions. Unless you are suggesting fading any move, and good luck with that.

In my view, it's definitely not priced in to any significant degree and that markets will react. The question is which way and how to profit from it.

I'm already short euro since a few weeks back, so hoping this will further my cause.

ok, i wasn't looking for an argument. you asked for other people's views and i responded. probably won't make that mistake again

the last hike caused a negative reaction but was quickly reversed....... several rate hikes can be absorbed before any economic change is noticed.... rather than being a brake, rate hikes can at times excelerate the rise in economys and markets.....

banks might back out their support this week and let the retailer's stophunts run wild.... odds are they will..... holiday times are known for that anyway..... last chance of the year to beat up on the hayseeds......

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will a single drop in the bucket rate increase change anything in the worlds big picture???.... who know's....... but in highly leveraged, high risk markets, low liquidity markets, at least briefly, things should get very interesting........h

Don't see how higher rates are supportive for economic activity, informed opinions is what I was look for, ideas for trades, 0 so far, come on...

Anyway, an interesting angle I though about goes as following:

1) Expectation of higher rates in China will drive bond traders toward Chinese market
2) Will lead to lower demand for US & European bonds driving yields higher
3) Will further destabilize Euro and funnily enough strengthen the dollar

So, sell EU&US bonds another possible trade

Out

obviously you are discounting what has been said......

a simple overlay of interest rates and the s&p might provide you with the 'informed opinion' you search.....

it is very common for markets to rise in step of interest rate hikes and even more common for markets to fall in step with interest rate reductions....

what lasting effect did the china october rate hike have.......

trade advice is not my style, sorry......h

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well said....... have mumbled that many times myself..... and it's the main reason i hang out in the code request section or over with the girls in the female network.....h

I'm not taking about interest rates hikes effect on the market, but on economic activity

well then overlay interest rates on a chart of economic activity......

both metatrader and metastock allow for overlaying interest rates, gdp, cpi, mci, pce, inflation, unemployment, rental vacancies or any such thing on anything else.......

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btw, the s&p 500 is thought to be a fair proxy of economic activity in the states.....h