A look at the day ahead in European and global markets from Tom

Westbrook

China's equity markets have chosen to run with the

authorities' latest vague promise of support for the sputtering

economy, with stocks surging to their highest levels in nearly a

month.

The state-media readout on Monday from China's Politburo

heralded a shift from "prudent" to "moderately loose" monetary

policy as well as a desire to boost consumption.

As with similar pronouncements in September there were no

firm details but, as then, equity investors were determined not

to miss out.

Warning signs, or at least more circumspection, seemed

evident in China's foreign exchange market, which hardly budged,

and bonds, which rallied while pushing yields to record lows -

showing doubt over whether growth is really going to pick up.

As China-watcher and Carnegie China senior fellow Michael

Pettis noted on X, plenty of debt has piled up under "prudent"

conditions without re-invigorating domestic demand.

"The problem with Chinese monetary policy until now has not

been that its tightness has led to slow growth and low

inflation, but rather that its looseness, directed almost

exclusively at the supply side of the economy, has accommodated

deeper imbalances and deflation," he said.

European stocks already caught a boost from China's policy

shift, with mining and luxury goods gaining on Monday, but the

extended rally in China may lend another session of support.

The data calendar is otherwise bare ahead of a busy few

days. U.S. inflation data is due on Wednesday ahead of a central

bank meeting in Canada and rate decisions are due on Thursday

from the European Central Bank and the Swiss National Bank.

The ECB is seen cutting by 25 basis points and the Bank of

Canada by 50 bps. Switzerland could also go by 50 bps, given how

much it has been spending to restrain the Swiss franc.

Australia's central bank rounded out its year on Tuesday

with a dovish surprise for traders, dropping a reference to "not

ruling anything in or out" for its next policy move and instead

noting it had gained confidence in inflation returning to

target.

The Australian dollar fell about 0.6% to $0.6401.

Key developments that could influence markets on Tuesday:

- German final CPI