China’s latest efforts to convince investors that it will boost its economy with great stimulus measures had the same reaction than the previous ones: disappointment. On Friday, the Chinese authorities repeated that they will boost consumption but the lack of details reversed the pre-announcement enthusiasm and sent the CSI 300 more than 2% lower. And the Chinese stocks were sold again today on the back of a significant slow down in retail sales growth last month, as confirmation that whatever is done in China is not bearing fruit. Meanwhile, the Chine yields’ nosedive does nothing to motivate investors to come back. That’s a massive problem that reminds investors of Japan which struggled with the famous ‘liquidity trap’ dilemma for decades – where the low rates couldn’t boost consumption and kept the economy in a low gear for decades. The only thing that could make the difference for China is that Japan was already rich when liquidity trap happened, China is not.

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In Korea, the political turmoil continues to weigh on sentiment, while in France, the relief on the appointment of Francois Bayrou – another very established name in French politics – to replace Barnier as the new French PM was clouded by Moody’s downgrading the French credit rating to Aa3 – three levels below the top. Moody’s blamed the political fragmentation, and Bayrou will probably struggle with the same divided government as his predecessor to pass any budget-healing measures.

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Nearby, German politicians will hold a confidence vote to pave the way for a Ferbuary snap election. But the German opposition said that they will maintain their borrowing limit unchanged if they come to power next year – as opposed to the earlier statements from the CDU leader Friedrich Merz about his openness to increase that limit to give more support to the economy – which obviously was not ideal for the budget discipline.

To summarize, nothing is less clear than the political picture in the eurozone’s two strongest economies, so the bets that the European Central Bank (ECB) must do the heavy lifting remains strong after last week’s cautious 25bp cut. The expectation is that the ECB will deliver another 25bp cut in January. But the dovishness is mostly priced in, therefore, the EURUSD should find enough support near the 1.05 mark and re-challenge the 1.06 offers.

Across the Channel, Cable is slightly better bid this morning, but Friday’s disappointing set of data – that hinted at surprisingly worse industrial and manufacturing production topped with surprisingly soft services – warned again that the British economy will see the backdrops of tax increases before it starts seeing the benefits of spending. The Bank of England (BoE) is expected to maintain its rate unchanged this week, to make sure to balance out the government’s spending plans, but some officials could sound dovish on the back of weak growth numbers. As per sterling, the selloff could slow on the back of a cautious BoE and an unnecessarily soft Federal Reserve (Fed). But the dream of seeing Cable end the year above the 1.30 is melting by the day.

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In Japan, the USDJPY is gaining traction to the upside as investors trim their bets for a Bank of Japan (BoJ) rate hike this week. Some officials had said earlier this month that waiting for the next hike would make little sense – a hawkish risk that should cap the USDJPY’s ascent near 155 into the decision.

In the US, the Federal Reserve (Fed) is expected to trim its rates by another 25bp when it meets this week. Last week’s CPI print was eventless, and the jump in the PPI number was mostly wiped out – as egg prices were mostly responsible for the uptick. What the Fed will announce about the next meetings will probably matter more than this week’s cut. On one hand, Powell recognizes that the US economy and jobs market remain resilient. On the other hand, Trump’s pro-growth policies and tariffs could boost inflation again. So, on both hands, there is nothing that justifies the continuation of regular cuts in 2025.

The S&P500 closed last week near record while Nasdaq advanced to a fresh record high on Friday. This time, it was Broadcom’s turn to shine. The company’s stock price jumped 24% to a record high on Friday after announcing better-than-expected earnings and saying that it expects a booming demand for their custom-made AI chips. Remember, Broadcom and Apple announced to build a chip together a day before. Tech companies’ willingness to build their own chips could be a opening for companies like Broadcom in the AI race – if they succeed in delivering strong, custom-made and cheaper solutions and threaten Nvidia’s share of pie. Nvidia’s ecosystem of software, tools, and AI research infrastructure remains a powerful defense, but its high valuation raises questions.