Mind The Gap; Morning Roll Call Before The New York Open

Jul 15 • Mind The Gap • 2103 Views • Comments Off on Mind The Gap; Morning Roll Call Before The New York Open

Why calling the Chinese data “fake” is a mistake…

tradingThere is a persistent rumour surrounding the data that is printed courtesy of China’s official national statistics bureau. Many in the mainstream media persistently smear the publishers and the Chinese authorities, suggesting that the data is manipulated in order to paint a better picture of the Chinese economy. However, you’d have to question what China would actually gain from deliberately publishing fake figures. Would their exports slump, would imports grind to a halt if the supposed ‘real’ figures were to be released, or would their juggernaut of an economy simply shift down from gear 18 to 16?

In many ways the ‘fake’ claim doesn’t stand up to close scrutiny. For example, if the Chinese economy fell headlong into a slump they’d be able to claim poverty and obtain better terms in their dealings with Australia for raw materials. China would be able to negotiate far better terms of supply and demand across a huge range of products, not just from Australia, but in many other developed economies.

There’s also another issue when criticising Chinese data that won’t have escaped the attention of market commentators and analysts. If en masse we no longer trust Chinese data supplied by their official bodies, why should we trust the data published by the USA authorities? Can we trust the data off central banks, such as the ECB, the Fed and the Bank Of England? Can the UK’s ONS be trusted? Finally we need to ask the question who benefits the most from ‘selling up’ its data to its population? Particularly when (in the UK and USA) it often feels as if the public are under a constant bombardment of positive feel good news stories through its mainstream media outlet in order to support such a fragile economy with persistent anaemic growth.

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Chinese GDP slows to 7.5%

China’s economic growth slowed for a second quarter according to its national bureau of statistics. Gains in factory output have weakened, which is at risk of weakening further due to the Chinese government reining in credit expansion in order to reduce the danger of a financial crisis. Gross domestic product rose 7.5 percent in the period from April-June from the year earlier, the National Bureau of Statistics said in Beijing today. That matched the median forecasts from economists questioned and compares with 7.7 percent in the first three months. June industrial-production growth matched the slowest pace witnessed since the global financial crisis. However, retail sales increased from an expected 12.9% to 13.2%, whilst industrial production fell from the previous 9.2% to 8.9%.

Market overview

The delivery of the Chinese data failed to cause negative reactions on world markets given that the print was in line with most analysts’ predictions. The MSCI all country index rose moderately by 0.1% whilst the Standard & Poor’s equity index future rose by 0.2% at 9:30 am (UK time) in the London session. The Aussie dollar climbed 0.6% versus the dollar, whilst yen fell versus sixteen of its major traded peers. The Nikki climbed by 0.23%, the Hang Seng closed up 0.12% and the CSI 300 closed up 1.40% as analysts predicted that the Chinese authorities will look for across the board methods in order to stimulate their domestic economy.

European bourses climbed in what many analysts termed a “relief rally” – the Chinese data was not worse than anticipated.

  • FTSE 100: up 47 points at 6592, + 0.75%
  • German DAX: up 43 points at 8255, + 0.5%
  • French CAC: up 21 points at 3877, + 0.57%
  • Spanish IBEX: up 43 points at 7888, + 0.5%
  • Italian FTSE MIB: up 102 points at 15533, + 0.6%

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Market focus

Sterling slid 0.2 percent to $1.5073 In the London morning session after declining to $1.4814 on July 9th, the lowest level witnessed since June 2010. The U.K. currency was at 86.61 pence per euro. It reached 86.94 pence on July 11th, the weakest since March 13.

The Aussie jumped 0.4 percent to 90.89 U.S. cents in the London session. Advancing  versus all 16 major peers tracked by Bloomberg, strengthening most versus the Singapore dollar and Swiss franc.

The dollar added 0.2 percent to 99.37 yen following a 0.3 percent gain on July 12th. It strengthened 0.2 percent to $1.3048 per euro in early trade after rising 0.2 percent at the end of last week. The euro was little changed at 129.68 yen.

Futures traders have raised their bets that the dollar will strengthen versus the yen, figures from the Washington-based Commodity Futures Trading Commission showed upon release on Friday. Wagers by hedge funds and other large speculators on a gain in the greenback outnumbered those on a decline by 80,305 on July 9th, the most since June 4th. That compared with net longs of 70,736 a week earlier.

Fundamental policy and news events which could effect sentiment

There is a raft of information, published today by various USA authorities and other trusted publishers, which rates as high impact news events. Core retail sales and retail sales numbers are printed, retail sales are expected to come in at 0.7%, a small advance on the previous month. The Empire State Manufacturing survey is published and the forecast is for a fall from 7.8% to 5.2%.

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