The Day So Far
The ‘good news is bad news’ theme is back in vogue this morning following the weak Chinese trade data fuelled hopes that the PCOB will ease further to revive economic growth. Sentiment across the board was aided further by a strong finish to the Asian session by the Shanghai Composite, which swung from 2% in the red early in the session to close almost 3% up on the day. China’s trade surplus grew by 40% as imports collapsed, no doubt the fall in commodity prices has played a part here though, but the slowing domestic demand remains a clear and present danger for Chinese authorities. For now though, equities are running with it, the Dax leading the way, up some 2.25%, and S&P futures 45 points higher from Friday’s cash close. We doubt the sustainability of this rally based on the ‘bad-is-good’; ultimately, global growth fears remain, especially in the wake of this China data, and moreover investors are growing increasingly sceptical of policy makers’ ability to revive the global economy. There was some other news to fuel the bullishness – UK M&A is running at its fastest pace since 2007, indicating that companies are feeling confident enough in the economist outlook to splash out.
The Afternoon View
US markets open today following the Labour Day long weekend and few data points of note apart from the Labour Market Conditions Index at 15:00 BST. This is also the final day before the Federal Reserve media ‘blackout’, where FOMC members are banned from public speaking in the week leading up to policy meetings, and Kocherlakota (Non-voter, Dove) is the final Fed-related economist to be speaking tonight before next week’s much-anticipated meeting. In the meantime, we do not want to fight today’s bullish momentum in equities and are short crude ahead of tomorrow’s DoE inventory data.
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