Global outlook presages new monetary measures

Proposed plans to introduce monetary stimulus measures have driven growth in U.S. stock index futures, with gains set to extend this week.

Mixed global economic data has been one of the primary factors supporting predictions of new monetary stimulus from central banks, including the U.S. Federal Reserve.

“One broad theme is the prospect of monetary stimulus, which may be propping up some markets today…There are significant fears that the global economy is running out of puff,” Fiona Cincotta, City Index analyst, said.

China adds weight

Leading the argument for stimulus, the Chinese government unveiled fresh measures on Monday, leading global stock markets to respond positively.

Asian markets started the day up, building on last week’s gains. The People’s Bank of China announced it willl cut reserve requirements, the amount of cash lenders must keep in reserve, to a 12-year low.

The move is forecast to release more than US$100 billion to the Chinese economy.

Fed rate cut forecast

Expectations are now high for rate cut by the Fed, especially given weak US jobs data that showed fewer-than-expected jobs in August. The probability of a quarter percentage point cut in Fed’s September policy meeting is now forecast to be 91.2%, up from 90% on Friday, according to CME’s FedWatch.

President Trump added pressure, tweeting “The Fed Rate, over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well. If that happened, our Economy would be even better, and the World Economy would be greatly and quickly enhanced-good for everyone!”