Forex Flash – Stocks globally slipped on Wednesday, with a continued stimulus-fueled rally in China the one bright spot, while the dollar came under pressure and crude oil retreated from a multi-week high.

European stocks fell 0.1%, after gaining nearly 1% on Wednesday. Oil and gas shares led the losses, falling 0.9% on concerns China’s stimulus plans would not do enough to boost demand.

The dollar, meanwhile, dipped to its lowest in a month versus the euro and in two and a half years against the British pound. U.S. consumer confidence data that showed the largest decline in sentiment since August 2021 had overnight boosted the case for a second hefty interest rate cut at the Federal Reserve’s next meeting.

The odds on another 50-basis point Fed rate cut at the November meeting jumped to more than 60% from 53% a day earlier, according to CME Group’s FedWatch Tool.

“It feels like more is coming on the rate cutting side,” said Samy Chaar, chief economist at Lombard Odier in Geneva.

The People’s Bank of China followed its announcement of wide-ranging policy easing on Tuesday with a cut to medium-term lending rates to banks on Wednesday. Beijing’s broad-based stimulus – the biggest since the pandemic – also includes steps to boost China’s stock market and support for the ailing property sector.

Mainland Chinese blue chips gained 1.4%, adding to a 4.3% jump in the prior session. Hong Kong’s Hang Seng climbed 0.7%, adding to Tuesday’s 4.1% surge.

While market players welcomed the stimulus, some analysts say the PBOC’s policy weapons don’t have the key enemy to economic growth in their line of sight: persistently weak consumer demand.

“It’s still short of that necessary to really handle the broad imbalances of the dampening down of domestic demand in China,” Lombard Odier’s Chaar said of the measures.

The strong start for Chinese stocks briefly invigorated other regional indexes, but those gains soon fizzled. MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.3%.

“The debate remains intense on whether there are legs to this rally, though the desk is seeing investors opting to buy/short cover first and ask questions later,” UBS analysts wrote in a note to clients.

DOLLAR ON THE BACK FOOT

Overall, the dollar stayed on the back foot.

In the wake of China’s stimulus, the yuan strengthened to a fresh 16-month high, briefly crossing the key 7-per-dollar level in offshore trading, before retreating to be 7.0173 per dollar.