The market is focused on the Fed this week but the bigger story is China.
Worries about a stumble in the Chinese economy have been percolating for weeks but that started to change with officials telling banks to cut deposit rates last week. That morphed into more cuts this week along with talk of fiscal support.
The smoke around the fiscal side is quickly growing into fire with the WSJ now reporting that Beijing is planning 'major steps' to revive the economy, including the possibility of infrastructure spending and looser property rules.
As part of its stimulus efforts, Beijing is considering issuing roughly one trillion yuan, equivalent to about $140 billion, of special treasury bonds to help indebted local governments and boost business confidence, according to people familiar with the discussions.
The China moves have been helping to underpin the Australian dollar this week and commodities.
Other plans include loosening restrictions on purchasing second homes in China's smaller cities.
There has been talk of stimulus coming on Friday but this report says it could come 'in the next few days'.
For the market, the big question is whether the rate cuts and fiscal measures are 'one off' items or part of a stimulus trend. It's starting to look more like the latter as officials grow concerned that China's animal spirits are dying.
