19 Jan 2016
China ends 2015 on a soggy note, weighs on risk - TDS
FXStreet (Delhi) – Annette Beacher, Chief Asia-Pac Macro Strategist at TD Securities, notes that risk assets are sagging on disappointing Chinese activity data for December and Dec qtr: AUD and NZD traded down 30- 50pips, Asia-Pac equities took a step down, and we suspect will weigh on commodities as the US re-opens.
Key Quotes
“Expect this poor price action on commodity currencies and equities to continue into London as the FT salivates over the “weakest GDP growth since 1990” (in annual growth terms, yes).
GDP, retail and IP:
Dec qtr GDP ended the year at 6.8%, a shade below TD/mkt at 6.9% and disappointing those looking for a “surprise” upward boost via services (sector details available in due course).
After 7.3% in 2014, 2015 GDP was 6.9%, consistent with the government’s “about 7%” GDP target. Consensus and TD expect the March CCP congress to reveal a GDP growth target of “around 6½%”.
IP in Dec sagged from 6.2% to 5.9%/yr while retail sales barely eased from 11.2% to 11.1%/yr, and so the gap widens, and is expected to widen further this year.
Implications:
Wobbles in the stockmarket and onshore-offshore currencies have been driving market volatility so far this year, not activity data per se. Nevertheless, prepare for another year of weak PPI, soft PMIs and a likely step down in the Chinese government growth target to 6.5%. A lower growth target would not surprise a single developed economy central banker.”
Key Quotes
“Expect this poor price action on commodity currencies and equities to continue into London as the FT salivates over the “weakest GDP growth since 1990” (in annual growth terms, yes).
GDP, retail and IP:
Dec qtr GDP ended the year at 6.8%, a shade below TD/mkt at 6.9% and disappointing those looking for a “surprise” upward boost via services (sector details available in due course).
After 7.3% in 2014, 2015 GDP was 6.9%, consistent with the government’s “about 7%” GDP target. Consensus and TD expect the March CCP congress to reveal a GDP growth target of “around 6½%”.
IP in Dec sagged from 6.2% to 5.9%/yr while retail sales barely eased from 11.2% to 11.1%/yr, and so the gap widens, and is expected to widen further this year.
Implications:
Wobbles in the stockmarket and onshore-offshore currencies have been driving market volatility so far this year, not activity data per se. Nevertheless, prepare for another year of weak PPI, soft PMIs and a likely step down in the Chinese government growth target to 6.5%. A lower growth target would not surprise a single developed economy central banker.”