**Equity Index**: The market showed strong performance throughout the day, with the Shanghai Composite Index reclaiming the 3,900-point level and the ChiNext Index surging over 2%. Gains outnumbered losses, with more than 2,900 stocks rising across the Shanghai, Shenzhen, and Beijing markets. Trading volume exceeded 1.88 trillion yuan. At the close, the Shanghai Composite Index rose 0.69%, the Shenzhen Component Index gained 1.47%, and the ChiNext Index climbed 2.23%.
Recently, the futures market has been oscillating near the lower range of its October levels, with limited divergence between large-cap and small-cap indices and frequent sector rotations. Market sentiment remains relatively stable. Following the December Politburo meeting and the Central Economic Work Conference, policy impacts on the market are expected to strengthen in the short term.
Key policy takeaways include maintaining a 5% GDP growth target for next year, with a focus on stabilizing domestic demand and accelerating the development of new productive forces. The conference emphasized boosting household income and consumption capacity as critical to reviving inflation expectations. Fiscal and monetary policies are expected to remain supportive, with potential slight increases in spending.
Overseas, despite the Fed cutting rates by 25bps and restarting balance sheet expansion, diverging expectations for 2026 rate cuts have caused volatility in U.S. tech stocks. Meanwhile, the Bank of Japan’s upcoming rate decision may impact carry trades. While policy meetings will influence equities long-term, short-term movements are likely to remain range-bound.
**Treasury Bonds**: On Monday, treasury futures closed lower, with the 30-year contract down 0.28%, the 10-year contract falling 0.09%, the 5-year contract dropping 0.06%, and the 2-year contract declining 0.02%. The PBOC conducted a 67.3 billion yuan 7-day reverse repo at 1.4%, matching the previous rate. Net liquidity withdrawal stood at 63.6 billion yuan.
Interbank rates showed mixed movements, with DR001 edging up 0.05bps to 1.27% while DR007 dipped 0.67bps to 1.43%. The Central Economic Work Conference reiterated a moderately accommodative monetary policy, with prudent rate cuts expected in 2026. Despite the PBOC’s recent 14-day reverse repo injection signaling liquidity support, bond market volatility persists amid resilient economic data and cautious rate-cut expectations.
**Precious Metals**: Gold hit a record high overnight, while silver, platinum, and palladium also strengthened. The gold-silver ratio fell to 64.4, and the platinum-palladium spread widened to $367/oz.
Fed officials remain divided on 2024 rate cuts, with markets focusing on the incoming chair’s ability to maintain policy independence. Geopolitical risks, including U.S. sanctions on Venezuela and escalating Russia-Ukraine tensions, further support gold’s bullish trend.
Silver, platinum, and palladium continue to follow gold’s lead, with the gold-silver ratio’s reversion extending to platinum and palladium spreads. However, caution is advised amid rapid price surges to avoid overheating risks.
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