Chinese government focussing on that level of 7.7% growth

Good morning all!

It looks like the volatility in equity markets may not yet be over as investors seem to have decided we can re rally from the lows seen over the last few weeks or so. US and European markets staged an impressive comeback on Friday managing to help lead a recovery to the correction. However we cannot yet rest easy and get back into the long term buying trend, with a whole host of economic data due for release this week and the all-important Chinese GDP figures set for release no one could rule out yet more selling.

The trading week will start a little more subdued this week, much the same as last Monday, with the economic calendar looking rather light of any big releases. However this is likely to be the calm before the storm as early morning on Tuesday we will get the GDP release from China. Chinese growth has been a worry for the markets for a long time, with the Chinese government focussing on that level of 7.7% growth. Tomorrows figures is expected to show growth down as low as 7.2%, a move that could have the potential to spook global equity markets further. Of course the GDP figure is one that is diluted somewhat, with much of the growth coming from stimulus measures. The importance to the market is not dampened by this though and there is real potential for more volatility around this number. With fears over the strength of the US economy, a weaker number from the world’s second largest economy would be a big blow for the global growth story.

Asia and China remains in focus as we move through the week with Thursday seeing the release of the HSBC manufacturing PMI number. Recent months have seen a much stronger figure here, giving investors optimism that China’s manufacturing power can get them out of the slowdown. So yet again a weaker reading could well give traders a reason to dump more stock.

There will be some European data this morning with PPI from German and current account data from the Eurozone, however after Friday’s strong performance in equities and with Asian markets following suit overnight it may well be a case of investors trailing that positive feeling over the weekend. The major indices are very much sitting on a knife edge at the moment. There is the potential for more downside after the falls of the last couple of weeks but Friday would have given people renewed optimism that the global rally could well still be on. This week will be pivotal in telling us whether we have already seen the worst or whether we could well see another 10% fall up towards the end of the year.

Ahead of the open we expect to see the FTSE100 open higher by 29 points, with the German DAX higher by 38 points.