Spreadex Market Update
Worst Chinese PPI figure for 6 years shakes investors’ nascent confidence
Despite the suggestions of extra spending that ostensibly boosted the markets in the last few days, in the weak data/potential stimulus conundrum only the former is a guarantee at the moment. China’s inflation may have increased to 2%, but that is due to the increasing expense of food rather than any economic improvement; the country’s producer price index, meanwhile, saw its worst drop in 6 years as it fell by 5.9%, adding yet another number to the tower of troublesome data coming from China. Thrown in Japan’s own gloomy PPI, falling by 3.6%, alongside the same fall in core machinery orders, and the market boosting comments from China’s Ministry of Finance and Japan’s Prime Minister Abe all of a sudden feel acutely insufficient.
So, with the Nikkei and Shanghai Composite both seeing their own tumbles at the close the European indices opened in the doldrums for their first negative start of the week. The DAX and CAC opened down around a percent, with the latter hurt by a big miss in the French industrial production figure. The FTSE, meanwhile, fell by 50 points, with strong gains by a half-year-estimate beating Next countered by the 47% drop in half yearly profits-inspired fall by Morrisons. Of course, the UK index’s commodity stocks didn’t help matters this morning, with the mining stocks especially hit by the dismal data from China.
If investors can look beyond the latest Chinese fumble, the Bank of England’s latest MPC rate vote is released at lunchtime, and should make interesting reading. Last month that was market-wide surprise at the fact Ian McCafferty remained the only official hawk on the committee, with pro-hike comments from Kristin Forbes and David Miles coming soon after ‘Super Thursday’. Now, however, nearly 4 weeks after the first yuan-devaluation kicked off a month’s worth of price erosion, there is a chance that even McCafferty could relinquish his hawkish vote for the time being.
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