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China’s Q3 GDP misses expectations at 6.0%

China’s Q3 GDP had been the latest to disappoint with the softest reading seen since at least 1992, although high frequency indicators broadly held up into September, providing mixed leads for markets.

Source: Bloomberg

High frequency Chinese data held up

Amid the escalation of US-China trade tensions into the third quarter, China’s GDP growth was seen slowing to 6.0% year-on-year, resting on the weaker end of the 6.0-6.5% forecast provided by the authorities for 2019. Even as the 6.3% H1 growth provides buffer, there is no denying that this growth slowdown trend is taking on a more apparent form through these readings.

The good news however rests with the high frequency numbers which saw September’s industrial production, retail sales and urban FAI improving from August, and mostly meeting or surpassing the consensus estimates. Signs of stabilization had presented themselves into September with various policy measures from the Chinese government having assisted in shoring up these readings. That said, the external sector remains evidently weak as shown in September’s trade data seen earlier in the week whereby both exports and imports had missed the consensus estimates. The affliction of the on-going trade dispute among others may continue to warrant the need for further and sooner support from the Chinese authorities.

Source: Refinitiv

Market reaction still focused on US-China trade

Post the release of the mixed readings out of China, one can see that limited reaction had been registered across the market. USD/CNH notably saw a slight dip with the release, trading around $7.0740 levels, down by a slight 0.1% for the day. While muted, the improvement in the high frequency readings coupled with the anticipation for further policy support had likely encouraged the moderate strengthening for the offshore yuan.

Comparatively, both the Hong Kong Hang Seng Index and the local Straits Times Index had traded little changed post the release. Closer to the heart of markets around the region may be the concern extended to the slew of geopolitical issues, particularly the US-China trade. Although the latest round of trade talks had reflected the intent for resolution from both parties, China’s latest remark on cancelling tariffs to end the trade war as the ultimate goal joins the list of outstanding issues the market had yet to seen resolution on. All said, the optimism instead for greater support from the authorities may nevertheless be one to join the hopes for a mini deal signing to aid Asia markets in short-term gains.

Back to Brexit for the weekend

Separately, the attention had been culminating on Brexit with the latest breakthrough of a draft deal fuelling positive sentiment for a resolution at long last. That said, there remains hurdles going into the end of the week with the UK parliament set to vote on the deal. As it is, the Northern Ireland’s Democratic Unionist Party had reflected their lack of support for the deal which could cut the chances of a passage slim. The potential for jaded parliament members to jump on this draft deal bandwagon after more than two years of Brexit discussions brings two-way risks for the currency going into the fresh week.

Rehashing on the trajectory of the GBP/USD pair since the 2016 referendum, prices had bounced between the heights of around $1.43 on optimism for a soft Brexit and the $1.20 lows on the plausibility of a no-deal Brexit. This binomial distribution like movement for GBP/USD could find better direction post this weekend’s vote.

Source: IG Charts

Yesterday: S&P 500 +0.28%; DJIA +0.09%; DAX -0.12%; FTSE +0.20%

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