It is RISK ON! two BIG move, two BIG surprises

Briefly, The last hour or so, we saw coordinated Central Bank actions, PBOC cuts RRR, very favorable ADP data, etc.

We just noticed high yield assets rallied sharply. Europe indices are up more than 3.7% UK FTSE is up 3% while US indices are up 2.9%.

Major Central Banks took coordinated actions to boost liquidity into the global financial systems. This was backed by the ECB, The US Federal Reserve, the BoE, the central Banks of Canada, Japan and Switzerland. This is a BIG surprise and BIG news.

There was speculation that China would cut their Reserve Ratio Requirement (RRR) in the 2^nd half of 2012, while the majority of analyst expected the cut to be in Q2 2012 while a few expected it to be late Q1 2012. Never would I give a thought that China had announced a cut in the RRR by 50 basis point today. This is another favorable surprise and BIG news. China is sending a clear message that they are ready to relax their monetary policies. The last time China relax its monetary policy stance was December 2008, how timely!

Thailand also followed fellow Asian countries like Australia, Indonesia and China to cut rates by 25 basis point. Asian countries are seen cutting rates to boost (global) growth rather than fight inflation.

The BIG news does not look like rumours as compared to the daily noises we hear coming out from Europe. It is CHINA. It is Central bank cordination! Looks like the whole act is coming into play. This is certainly a RISK ON for the next 1-2 days.

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