Morning Meeting: Chinese's Awakening

Good Morning.

It has been a busy weekend from a political stand point of view but let's start in order.

• China's trade surplus rose to $31.99 billion in October from $27.67 billion in September, data from China's General Administration of Customs showed Saturday. Surprisingly strong export data will likely reinforce market confidence that the Chinese economy is now recovering from a prolonged slowdown. China's October exports rose 11.6% from a year earlier, faster than September's 9.9% rise and higher than economist expectations for a 10.0% expansion. Imports, however, rose a lackluster 2.4% from a year earlier, unchanged from September's rise and short of economist expectations for a 4.0% rise.
• The Chinese data contrasted with numbers out today showing Japan's economy shrank 0.9% in July-September from the previous quarter, the first contraction of the year according to the Cabinet Officer, with weakness for exports: particularly for cars and computer chips, reportedly helping drive the contraction. The Nikkei reported Saturday that Japan's auto sector could take a ¥130 billion profit hit, after exports to China were damaged by recent Sino-Japanese tensions over a group of disputed islands.
• The Greek parliament approved an austerity budget for next year during the night, avoiding bankruptcy. With backing from all three parties in conservative Prime Minister Anotonis Samaras's coalition, the bill passed by a more comfortable margin than a separate package of deficit-cutting measures. At this point Greece expects the funds from international landers to be forthcoming, although today's meeting in Brussel of Euro-zone  finance ministers is not expected to take a final decision.

Markets reaction this morning has been mixed: on one side we have Hong Kong's Hang Seng Index which edged 0.1% higher to 21,404.28 and the Shanghai Composite which fell 0.29% to 2,062.62, it traded 0.30% higher earlier in the morning. On the other side Japan's Nikkei Stock Average lost 0.83% to 8,684.95. According to Bloomberg data equity trading volume was lower than average for the time of the day with 27% fewer shares trading hands on Japan's Nikkei and 41% less on the Hang Seng.

Currency wise the greenback traded flat versus the Japanese Yen, while the common currency was lifted by the Greek vote trading 0.16% higher versus the dollar to 1.2730$. The move supported dollar denominated commodities such as Gold, which rose 0.24% to 1,735$ an ounce, and Oil (WTI), which traded 0.06% higher to 86.12$ a barrel. Base metals such as copper, face limited upside as improving Chinese data quenched hopes for further stimulus while the timing of expected infrastructure spending is still unclear.

It's heavily important to point out that the change in leadership in China is also affecting the global capital flows as plans are put in place to boost foreign investment in mainland stock and bond markets by raising quotas for the Renminbi Qualified Foreign Institutional Investor scheme, which allows approved investors to channel offshore yuan funds into mainland markets. It eyes rising the quotas for the Qualified Foreign Institutional Investor scheme, the original, dollar-denominated program that allows institutional investors to buy stakes in Chinese-listed stocks or bonds. According to Reuters.

Data coming from China this morning have thrown water on our “Chinese time bomb” hypothesis, as it looks like the worst is behind us, but the market reaction does not suggest so. It will be paramount to study the market reaction to the Greek vote although the EU finance Ministers' meeting will be under the spotlight today. Some uncertainties have been removed although the November 16 deadline is eyed, as Greece will roll over 5 billion euros in treasury bills maturing on that date.

It's now time to work on our daily game plan, have a great day.

Originally posted at www.77sigmatrading.com