China GDP, Retail Sales Data Out Tonight (Mon.); Brent Crude Briefly Falls To $27.67 Per Barrel Before Settling Above $28
“China GDP, The Elephant In The Market
The above is the title of an article on CNBC’s website this afternoon, by Leslie Shaffer. She writes that “China’s economic growth data for 2015 are due Tuesday [this evening in the U.S.] Nomura is forecasting fourth quarter GDP growth in China slowed to 6.4 percent — from 6.9 percent the previous quarter.” “The moderation would largely reflect a much smaller contribution from financial services (reflecting the slump in the equity market). However, growth in the rest of the economy should be similar to the third quarter, as weakness in mining, construction, and heavy industry are largely countered by strong public infrastructure spending, consumption, and services.” Nomura said in a note to clients on Friday. Mizuho Bank said “Tell-tale signs of the lethargic industrial activity to dismal PMI manufacturing have markets bracing for a disappointing read of 6.9 percent; and, “is likely to renew pessimism,” the bank said in a note to clients on Monday.
“Bears will bemoan China’s inability to to rekindle growth — despite the slew of stimulus launched via the monetary, banking, and fiscal channels. And currency market cynics will seize this apparent policy impotency as grounds for yuan devaluation; a favorite conspiracy theory. And talk of ‘currency wars’ could potentially add to the bearish momentum in the markets,” Nomura warned.
Moody’s Analytics wrote that “China’s economy decelerated further in the final quarter of 2015, judging from slower growth in industrial production and fixed asset investment, and falling imports and exports. Price pressures are nonexistent, and the government cut interest rates in the quarter, which indicates a continued output gap and need for stimulus. Our tracking model puts GDP growth at 5.7 percent year-on-year, but the official series is expected to come closer to 6.8 percent, possibly boosted by higher financial sector activity.”
Regardless of whether or not you believe the Chinese numbers, the numbers to be released later tonight are likely to move markets and will be a big impetus — for either a rally from currently oversold conditions, or provide the excuse for even more selling to the downside. Traders and investors are nervous, no question about that. If we get something really disappointing, look out below. If we get something better than expected, I do not know how markets will react, as doubt about the veracity of the number will no doubt be a hot topic of discussion. Hold on to your seat-belt — this could be volatile.
Oil Slides To An 11yr. Low – With Brent Crude Dipping Below $28 Before Settling At $28.77
The other elephant in the room, besides China, and the Federal Reserve, is oil. Iran’s rejoining oil producing countries, helped push Brent Crude down to $27.67 per barrel earlier today, before recovering somewhat — closing at $28.77, a loss of seventeen cents per barrel. Meanwhile, U.S. West Texas Crude (WTI) lost 48 cents or -1.63 percent at $28.94. Reuters New Service reported this afternoon that TD Securities Analyst Bart Melek said oil could fall further if Chinese economic data released overnight, including fourth quarter 2015 GDP data and retails point to more weakness,” in the world’s second largest economy.
The U.S. stock futures will tell the tale tomorrow morning. If you can’t sleep, or want to know right away, tune into CNBC Asia this evening. V/R, RCP