2015/04/20 Concise Non-Video Comment(early)
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CONCISE COMMENT (Non-Video): Monday, April 20, 2015 (early)
Thursday’s TrendView Global View video analysis and the General Update Market Observations from after the US Close with the evolution of those insights in Friday’s Concise Highlights video analysis remain the relevant views and trend assessments. While there were some aggressive price swings Friday, it is all consistent with those previous analyses of our continued skepticism toward US equities (which has finally infected other markets), the strength of govvies and the weak data elsewhere putting the bid back into the US dollar. While that last aspect might be nothing more than a ‘least dirty shirt in the hamper’ phenomenon, it held key technical support Friday.
And it was all substantially based on the weak economic data elsewhere while the US reports have been more so erratically weak. And of late that has especially meant the very weak data out of China that was accentuated by the surprisingly abysmal Chinese Trade Balance last Monday morning, with export figures particularly weak. While expectation for a still very positive overall Trade Balance was predicated on lower imports as well as exports remaining up, even imports were weaker than expected. And exports ‘tanked’.
In the context of expectation for them still rising 10.0% year-on-year the drop of 15.0% was especially disconcerting. That was exacerbated last Wednesday by the GDP coming in as expected at 7.0% annualized growth, yet with weak Industrial Production and Retail Sales figures; with the latter being especially troubling in light of China’s stated desire to move from an infrastructure investment economy to a stronger retail consumer culture.
So maybe it shouldn’t be so much of a surprise that the Peoples Bank of China should attempt to address the situation with its next serial Reserve Requirement Ratio cut. That said, the size of the full percent cut to 18.50% caught some observers by surprise. It also highlights the cross currents PBOC is faced with. The struggling property sector desperately needs all the help it can get. On the other hand, it is of note that new limits on speculative trading were introduced late last week to offset extreme equities strength. Unlike other central banks, PBOC must be a bit more cautious in its stimulus activity. In the meantime, the market activity so far appears to be a reaction rather than a reversal.
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