No Relief as the Chinese data disappoints again


Following  a dire Tuesday on equity markets around the globe investors were looking at the data from China for clues regarding further direction and did not like what they got. While Europe recovered somewhat and the Wall Street stabilizes, caution dominates on the markets.

The Chinese PMI declined to 47 points in September, down for the third month and down to the lowest level since March 2009. This is a grim news indeed as it shows efforts from the PBOC to keep growth around the 7% government target bring little effect and investors should fret there is less and less the authorities can do about a slowdown that could derail global recovery. Markets reacted negatively and the AUD is the weakest G10 currency today declining nearly 2% against the euro!

European equities recovered a bit from Tuesday’s losses as the German PMI went out close to expectations (meaning the Chinese slowdown is not yet hitting Europe hard) and the VW’s CEO resigned following a scandal that sent shares down by 40% in a matter of just 2 days.
Wall Street was mixed today with a large spin candle showing how undecided investors are. However, technical outlook for the S&P500 isn’t favorable at the moment.

On the G10 the euro was very strong today mostly for technical reasons, bringing our trade idea from the Wednesday morning to the target in a span of just few hours.
The Canadian dollar has been under pressure from the data and declining oil prices while the Norwegian krona was unable to benefit from a strong labour market reading precisely because of the situation on oil. Oil inventories declined for the second straight week above estimates but the US output increased and thus a positive reaction was short lived.

We got the Ifo in Germany today and some second tier reports in the US but no more data from China this week. That means no more bad news but also plenty of time to contemplate Wednesday’s poor report.