Markets Cheer China Again!

Asian markets were mostly on the rise today as the slew of data coming out of the world’s second largest economy, China, impresses and calmed investor’s nerves. Inflation steadied in China today indicating stabilization.

The Consumer Price Index (PPI) rose 2.7 percent annually in July. This is unchanged from June. The Producer Price Index (PPI) fell 2.3 percent annually which was better than what we saw in June which was 2.7 percent. PPI speaks to the capacity in industry. This in turn, reflects a structural vulnerability we have seen in China’s economy. Investment into China seems to be driving down the PPI which is good.

Bank of Japan Governor (BOJ) Haruhiko Kuroda helped to support the Japanese Nikkei and yen with unusually stronger comments. He issued a strong warning against any easing regarding fiscal discipline. He stressed, strongly, that Japan can and should raise sales tax and still maintain its economic strength. His remarks boosted equities and helped to weaken the yen.

STOCKS

The Nikkei 25 was up 0.3 percent today. The Hang Seng Index is nearing the 21,700 level and the Shanghai Composite was up 0.3 percent on the day. However, the Australian S&P/ASX lost a marginal 0.6 percent and the Kospi, in South Korea, traded flat on the day.

Stronger Chinese trade data helped boost the U.S. markets which snapped a three day losing streak. The S&P 500 is, once again, just below 1,700.

The DJIA was up 27.65 points to 15,498.32 points and the NASDAQ was up 15 points to 3,669.12. The S&P 500 rose 6.50 points to close at 1,697.48 points. The Microsoft Corporation (NYSE: MSFT) was up over 2 percent on the day to help move the Dow higher. This rally came after Evercore Partners raised its rating to Overweight on the technology giant.

European markets were also up yesterday, but could see some weakness today on some weak data coming out of Germany. The bloc’s largest economy say earnings drop in Q2. The banks saw a net profit of €43 Million short of the expected €65 million. Despite these numbers, the German DAX was up 57 points to close at 8,318.32 points.

CURRENCIES

AUD/USD (0.914) received some support from good economic data out of China. Where China goes, the Aussie goes. The AUD/USD is now trading back in the 0.9000 to 0.9350 area before it broke lower again and tested 0.9150. Staying above 0.9100 is good for the Aussie Dollar. Please see the chart below.

EUR/USD (1.338) the market is in a short term channel but could weaken on Greek unemployment numbers as well as weaker German economic data that we received overnight. We could be testing the support at 1.3355 today. If it holds, we could recover a bit into a range trading pattern.

COMMODITIES

Copper (3.248) was well bid yesterday, before the release of the stronger than expected Chinese economic data. Remember, copper is a major export of Australia and China is a major importer of Copper. Where China goes, so does the price of copper. We are well above the key 3.20 level where we must stay to change our long bearish note on the metal. Below 3.20 can test 3.00 and that is not a good thing.

Gold (1311.50) was stronger yesterday, as money moves out of the U.S. Dollar. The precious metal rose 1.9 percent and can test 1325.00 at some point today.

TODAY’S OUTLOOK

Today, outside of China, is a relatively quiet day for economic data. The strong numbers from China should boost markets, short term. We will see whole sale numbers being released later in the day out of the United States and we will see if data is strong enough to ease investor worries in Europe. Greek unemployment is scary and a slowdown in Germany can force markets lower. We will wait and see.