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Bull In A China Shop

Risk asset buoyancy amid a cloudy outlook.

Risk sentiment is broadly buoyant at the end of a week that was at times characterized by lackluster trading and aimless markets in search of a compelling narrative to latch onto. One of the points we made on at least two occasions (here and here) over the past five days was that for the time being, the dollar and headlines around China's stimulus efforts would likely be the only discernible drivers if nothing else came along to tip the scales in one direction or another. When it comes to the nascent "reflation" trade, the direction of the dollar and China's success or failure in convincing the market that Beijing will resurrect growth and provide ample liquidity are mission critical. On Friday, at the close of the NPC, Premier Li Keqiang reiterated the party line that China won't "kitchen sink" it (so to speak) when it comes to stimulus. "An indiscriminate approach may work in the short run but may lead to future problems, thus it’s not a viable option", he said. Do note that Beijing always parrots that line, or some derivation thereof. And while there's a solid argument to be made that the bubbly feeling of domestic equities may indeed make policymakers wary of injecting a t
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