Oil hits $91 as yuan surges to 3-year high — two forces pulling China equities in opposite directions
Us Session Recap
The dollar selloff continues. TNX retreated to 4.56% as Fed rate-cut expectations collapsed entirely — X traders are buzzing that zero cuts are priced for 2026, with some bond traders even pricing a possible hike. SPY held near $746 (QQQ $718) despite hawkish Fed signals, with VIX muted at 16.59. Kevin Warsh's debut as Fed Chair hasn't moved markets yet — he's inherited sticky 3.8% CPI and a board openly debating hikes if inflation stalls. Bitcoin decoded to $76.5K as risk appetite survives the macro headwinds.
China Watch
The yuan is the story. Offshore CNH touched 6.79 — its strongest level since early 2023 — driven by China's massive trade surplus and narrowing rate differentials. Goldman Sachs flagged the yuan as significantly undervalued. This is a double-edged sword for Chinese equities: a stronger currency attracts foreign inflows into CSI 300 (trading ~4,845) but pressures export margins. SMIC A-shares surged 10% on heavy volume (17B yuan) as China doubles down on semiconductor self-sufficiency. Meanwhile, oil at $91/bbl (off the $110+ spike highs but still elevated) cuts both ways — bullish for energy exporters, but inflationary input for China's manufacturers. X analysts are flagging the rare earth export controls on tungsten and other critical minerals as a potential escalation flashpoint if tariff talks collapse.
Risk Flag
The Fed's hawkish pivot combined with oil above $90 creates a stagflationary squeeze — worst-case scenario for risk assets globally, especially emerging markets and China.
Trade Signal
Long FXI (China large-caps) on the yuan strength narrative, but size accordingly given Fed headwinds; avoid KWEB (tech/growth heavy, rate-sensitive). The divergence between onshore tech (ChiNext +0.93% session) and offshore China (lagging) confirms the trade: buy the A-share momentum, sell Hong Kong exposure.
今日要点: Yuan strength + oil at $91 = China equity volatility. Stay long FXI, off KWEB.