View from London: The Good Times Roll in China
So, we are all going to focus on China growth as the upside surprise and wait for more 2Q earnings reports in the U.S. Welcome to the best of times and summer, writes Bob Savage, CEO of Track Research in Monday commentary from London.
Bears are likely to act more like Eeyore from Winnie the Pooh today.
The good times rolled in China in 2Q even though many in the West doubt the data and can’t see it sustaining. The ability to grow even as money supply shrank and rates rose surprised many economists.
The ongoing political shakeouts are another factor that mixes badly with too much debt. The positives are that high-tech manufacturing drove some of the growth along with online retail sales lifting the domestic demand side to near 64%, well below the U.S. and Japan and Europe but still in the league of the G7.
The leveraging and deleveraging of global economies is part of how investors see risks and trade for the future but in a nation where there is Winnie the Pooh in charge few are able to see beyond the honey pot–at least from an official standpoint. This is the problem and promise of the day ahead with Japan on Marine Day holiday and the lack of other economic data notable.
So, we are all going to focus on China growth as the upside surprise, Chinese yuan/US dollar (CNY/USD), and wait for more 2Q earnings reports in the U.S. Welcome to the best of times and summer.
The risk mood is up and the waiting for BOJ and ECB means few will be bold in selling bonds leaving it up to other markets to move the volume needle.
The euro/dollar (EUR/USD) is holding and for now, that might be the most exciting thing to watch as Les Bon Temps Rouler.
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