Morning Minutes

Positive China Data Keeps Equity Bounce Going




China has been the big story in world markets to turn the trading week. The Hang Seng plunged 6.3% after the Chinese National Congress confirmed President Xi as leader for a third five-year term. Most other places, stocks have been soaring, building on Friday’s big US bounce that saw the big three indices all gain about 2.3%. This morning finds US index futures up 0.4% to 0.7% with Dow Futures leading the charge. Over in Europe, the Dax is up 1.6% and the FTSE is up 0.5%.

Investors have responded positively to a basket of Chinese economic indicators released after the Congress ended. Highlights included better than expected Q3 GDP (3.9% vs street 3.4% and Q2 0.4%), export growth (10.7% vs street 4.1%), and industrial production (6.3% vs street 4.5%). Retail sales, however, fell short of analyst estimates (2.5% vs street 3.3%).

Flash PMI reports, the first peek at October economic conditions around the world, on the other hand, have been more of a mixed bag. Asia Pacific reporting was positive with Japan above 50 and beating expectations on both numbers, along with Australia flash manufacturing, while Australia service was soft. In Europe, all the main numbers for the UK, Germany, France and the EU were below 50 in contraction territory. US flash Manufacturing (street 51.2) and flash Service (street 49.2) reports are due at 9:45 am EDT.

Monetary policy news picks up again this week with the Bank of Canada and the European Central Bank both expected to announce interest rate increases, and the Bank of Japan expected to talk currency defense when they hold meetings this week. Heading into next week’s Fed meeting there are several significant economic reports later this week including US Q3 GDP and Core PCE inflation.

We move into the heart of earnings season in the US this week and results pick up from Canada as well. US headliners include Microsoft and Alphabet on Tuesday, Boeing and Ford on Wednesday, McDonalds, Merck, Apple,, Intel and Caterpillar Thursday and Exxon Mobil plus Chevron on Friday.  In Canada, notable reports include CN on Tuesday, CP and the first gold miners Wednesday, Shopify and Teck Resources Thursday and Imperial Oil plus Air Canada on Friday.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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