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Stocks in Europe are trading higher today on the back of strong lending figures from China. The market has been waiting for some sign that Beijing will try and half the slowdown in economic growth, and today’s new data is a step in the right direction.
The Beijing banks have come under pressure recently as bad debts are being racked up, but a ramp up in the money supply has lifted spirits for now. Stocks in the commodity space have benefitted the most from the Chinese lending figures, but traders still don’t fully trust the mining sector, and the rally will be difficult to sustain.
Burberry shares have taken a battering this morning as the poor performance in China put a dent in the company’s revenue. Burberry took full advantage of the expanding Chinese middle class over the years, and now those middle-income earners will keep shopping more locally from now on.
Ashmore Group shares were spooked by yet another outflow of funds as investors are running scared of the emerging markets. Ashmore is relatively protected from the market volatility of the Far East as the majority of the fees are in US dollars, but the tide has turned and funds are flowing back into developed markets.
In the US, we are expecting the Dow Jones to open 100 points higher, at 17,025 as the strong finish in Asia helped the broader market. The beige book report was very beige, and dealers are not fearful of a rate hike in the near-term. The US CPI report will be the highlight if the trading session, and the slump in commodity prices is fuelling the view that inflation will stay in negative territory, and thus diminish the likelihood of an interest rate rise this year.