That was quite the show yesterday. The market was clearly unhappy. The question is: How unhappy is the market today? Today’s Chinese Flash PMI data speaks to an upside in the Chinese economy, but European data speaks to further contraction there.
- The China HSBC Flash Manufacturing Purchasing Managers Index (PMI) rose to a three-month high of 49.1 in October, also registering the most robust order books since April, signaling a strengthening recovery.
- Stocks slid earlier as separate reports showed euro-area services and manufacturing output have contracted more than economists had forecast, while German business confidence unexpectedly declined.
The US market opening today was clearly different from yesterday, so let’s go with the market is unhappy these days, but not so unhappy that it wants to keep on running from the problems of the world …
”It just doesn’t make sense,” Gordon Chang says, claiming that the true number is probably zero or 1%. “This number is not consistent with what we know about the Chinese economy.”
Isn’t that interesting? The author of the book, The Coming Collapse of China, bluntly says the data out of China is fabricated, that the reality of China is that its GDP growth is not 7.4% at all. Should we be afraid, or should we assume that Mr. Chang is another in the long line of wild-eyed wanderers shouting doom from the nearest hilltop, in this case “Breakout?”
Before answering the question, one has to ask, if he is correct, how does the Chinese government get all those thousands of Chinese businesses to respond to the survey according to the Chinese government needs? “Oh, they might not,” you say. “The Chinese government simply takes the results and makes them what it wants them to be.”
Okay, that might be true for the actual Chine government PMI data (still unlikely though), but the fact is the HSBC Flash PMI data comes from a survey of over 400 businesses done in conjunction with Markit, an independent and highly respected firm that collects market data from all over the world. The answer to the question, then, is that Gordon Chang is another in the long line of wild-eyed wanderers shouting doom from the nearest hilltop. Sheesh! Then again, maybe Mr. Chang and the likes of Dr. Roubini are not nut cases after all. Maybe, they have figured how to make money off the wild-eyed shtick that seems so “hot” right now …
Enough of my ranting. Back to the unhappy state of the market …The quote below is something to consider when thinking about the future of the market.
Amid a lackluster earning season that has featured many companies missing sales expectations, cash balances have swelled 14 percent and are on track toward $1.5 trillion for the Standard & Poor’s 500, according to JPMorgan. Both levels would be historic highs. But with the S&P 500 breaching important support levels and an economy hungry for a growth engine, it’s only a matter of time before that patience wears thin.
Now what exactly could this information mean? Is it good or bad for the market?
Trade in the day; Invest in your life …
