I just read the best news I’ve seen out of China. Perhaps this was already priced into the markets, but it’s a very positive. Now, on to soft landing.
It’s about food prices in China- those stubborn food prices that have skyrocketed in 2011 and caused great consternation and civil unrest.
On the news, the Shanghai A’s were up 1.63%, and the Shanghai B’s were up 2.19%. Nice moves. Perhaps were seeing the first glimmer of the Bear starting to fade into the background.
According to the Ministry of Commerce in China, food prices continued to decline for the week ending Oct 23rd. Vegetable prices were down 2.5%, and pork prices abated by 1.85%- that’s huge for China’s economy. Eggs retracted slightly as well.
As a result of this new data, economists are now forecasting a CPI index under 5% in the next two months- welcome news.
Commodity prices rallied globally on the news, and European stocks were even up as well.
Now, the markets will wrestle with the “Soft Landing” scenario, or “Recession” scenario. I’m no economists, but it seems to me the recession scenario is an unlikely outcome with 17.5% retail sales growth and the largest emerging consumer class in the history of the world just getting started.
9.1% is the number- that’s GDP growth in China in Q3. It’s the lowest in 2 years, but that certainly doesn’t seem too bad to me in light of all that’s going on around the globe. Chinese exports were hurt by the slow down in Europe, but retail sales within China grew about 17%- that’s impressive.
One would think the markets would respond positively to this news- not so. Many news services are reporting 9.1% was a disappointing number. However, that’s not why those markets were down. With inflation being the primary enemy of the Chinese economy, a little cooling off of GDP is not the worst thing in the world.
It was news out of Germany that dampened the world’s appetite for risk and equities. German Chancellor Angela Merkel’s chief spokesman said EU leaders won’t provide a quick ending to the debt crisis at an Oct 23 summit. Last week, the market had been optimistic the EU would begin to deal with this problem. The Germans killed the optimism, and down stocks went. It seems all global equities markets are being held hostage to the EU banking crisis.
The Shanghai A shares sold off rather harshly overnight- down 2.35%- the B shares identical at 2.35%- leaving China markets still very deeply in Bear Market territory- down about 20% on the year.
There has been rumors abounding suggesting the Chinese are ready to step in a help with an EU bailout. The rumors say they are just waiting for the enormity of the problem to be defined. This was reported in the UK’s Sunday Times.