Chinese data has disappointed over night with GDP, industrial production and retails sales all missing estimates. However, if you look at how Asian markets have performed overnight the data impact was positive for the markets. China almost touched the 3000 level and Australia closed above 4900 gaining 0.9%.
Traders will be asking how these gains are possible after disappointing data.
To make sense of this scenario, one has to look at the increasing possibility that the Chinese government will pump more money into the economy to counteract the apparent decline in the economy. Therefore, investors were upbeat today resulting in gains throughout Asia.
This also means that it could be a favourable day for Europe. We are calling the Germany 30 up 91 points steering clear of the 2015 lows of 9400. There is a mix of data coming out of Germany today with Economic Sentiment and EU CPI being released simultaneously. If these figures come out better than expected we could see a move higher; however, upside in equity markets could remain limited with the unclear picture coming out of Asia and continued commodity weakness.
The immediate outlook for Oil remains negative with Iran adding to the pressure by massively increasing output to 500,000 Bpd. This is just the start and if Iran will ramp up production further, it could single-handedly offset the reduction by other non-OPEC members. Hence, any rallies in oil to $31.60 could be selling opportunities for traders looking for a price of the commodity closer to $20.