No More Saving For A Rainy Day, China ‘Has To Resume Headline Easing Soon’, SocGen Warns
The latest activity data out of China (for July) disappointed anxious markets.
Retail sales missed badly, fixed asset investment was a shade below expectations and industrial output growth printed just 4.8%, well below the 6% consensus was looking for and the lowest read in 17 years.
You could easily argue that China's lackluster July activity data tipped the first domino in a chain reaction that ended up inverting the US 2s10s and pushing the Dow to its worst day of 2019 on Wednesday.
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I wonder what will happen if China’s economy actually contracts and shows negative growth? Will bonds have a negative yield of 600 bps?? That’s how insane this bond market has become, if the Fed and Treasury don’t take advantage of this and unwind their holding they have themselves to blame when it reverses and the market realizes none of this debt will ever get repaid…..
China is not going to allow the numbers to get overtly bad. The thing that is really difficult for China bears (e.g., Kyle Bass, etc.) to come to terms with, is that Beijing has an extraordinary amount of control over economic outcomes, not to mention the mainland equity market and the currency. sure, they can lose control, but they are incredibly adept at juggling, and the bottom line is, if stocks fall too much, they buy them and/or halt the market and/or arrest anyone who sells. if capital flight starts up amid a steep devaluation, they’ll just crack down on it until it stops. what makes this so maddening for China bears is that this only works because of China’s size. they can basically do whatever they want and everybody just kind of has to live with it. obviously, there are limits, but people have been waiting on China to implode for a long time, and it never does
I agree with Kevin Muir. Monetary stimulus has gone Nuts! Although China has room to cut rates, they are better of with Fiscal stimulus.
yeah, Kevin is exactly right on where the world is eventually headed — or at least he better be right, otherwise this whole thing is going to dead end. Stephanie Kelton is correct: we’re going to have to marry monetary and fiscal policy, only when we do, we have to make sure that the executive isn’t a lunatic like Erdogan or Trump