The Opening Belle

October 09, 2020 • Estimated Reading Time: 7 minutes

The broadly positive risk tone continues.

Japanese shares were softer after disappointing consumer data.

China's equity markets aren't hanging about after their Golden week holiday.

U.S. Futures in the green too

It's getting messy (messier?) now.

Trump is up for a stimulus bill, the larger the better.

The GOP are generally worried about going much over 1 trillion, with Mnuchin's $1.6 trillion figure already uncomfortably high.

Pelosi says there can be an airline aid bill, but only within the context of a broader package agreement.

None of their positions have really changed, and markets are taking it in their stride.

As long as the stimulus is coming at some point in the near future (maybe even post-election), all is well in the stock market.

The longer these talks continue, the greater the risk of a "sell the fact" reaction if any pre-election stimulus package is announced.

China's Golden Week was to be 'the moment', the Chinese economy would roar back to life with the return of consumer spending.

All of the buzz-words were rolled out; 'pent-up demand', 'revenge spending', and plenty more.

Reality rarely matches up to the hype.

Spot the odd one out.

The Global Times always delivers.

So, what's the data?

Retail and catering sales rose 8.5 per cent between October 1 to 7 from a year ago to 1.52 trillion yuan ($212.6 billion), according to China’s Ministry of Commerce, decelerating from a growth rate of 9.5 per cent last year, marking the slowest growth rate since the initial year-on-year comparison was published in 2001.

Tourism revenue over the period was 312 billion yuan (US$45.9 billion), a drop of 31 per cent from the first four days of the holiday last year, official data showed.

The fact that fewer Chinese people were travelling – and that the average spending per tourist dropped by 12 per cent – showcased continued weak consumption in the world’s second biggest economy

Separately, home sales continued to fall during the National Day holiday, particularly in the largest, tier-one cities such as Beijing, Shanghai, Guangzhou and Shenzhen, according to Centaline Property Agency.

The number of property sales in the capital city of Beijing dropped nearly 30 per cent from the same period a year earlier to 64 between October 1 and 6.

Property Developer Evergrande offered steep discounts for the traditionally busy holiday period, with Bloomberg reporting that their September and holiday sales reached 71% of the 2-month target;

...average selling prices at 8,627 yuan per square meter during the period, 11% lower than the level in August. The average price is also the lowest since August 2016, according to data compiled by Bloomberg.

Things are not going as well as reported in China.

Manufacturing has ramped up, but domestic consumption is lagging well behind.  

 We can all agree #China is recovering well from #COVID. But its economy did NOT expand YoY in Q3. We have huge amts of data on this.

So Q for all the bank economists making outlandish Q3 GDP growth calls of 5%+: Based on what? Anything other than govt claims?

SHOW. YOUR. WORK.— China Beige Book (@ChinaBeigeBook) October 7, 2020 

Manufacturers will need to get their inventories shifted, and a lot of this excess production would likely end up being exported globally, at a discount.  

This is not a new phenomenon.

The above excerpt is from a Bloomberg article published in November 2019, before Covid was even a factor.

China Services & Composite PMI

Japan's Household Spending & Wages

Japan’s household spending fell for an 11th straight month in August and real wages marked half a year of declines, as consumers struggled to return to their pre-pandemic purchasing habits.

Analysts see the economy picking up from the slump caused by the coronavirus but weak spending and wage figures highlight the challenges new Prime Minister Yoshihide Suga faces as he works to revive the economy.

Household spending declined 6.9% in August from a year earlier, government data showed on Friday, matching a median forecast in a Reuters poll.

Compared with the previous month, household spending rose 1.7% in August after a 6.5% decline in July.

“We expect the overall economy including consumer spending will pick up as the economic activity restarts,” said Yusuke Shimoda, senior economist at Japan Research Institute.

“But people remained cautious about risks to get the virus infection and wages are expected to worsen further, so the pace of recovery in consumer spending will likely be limited.”

Separate data on Friday showed the nation’s inflation-adjusted real wages fell 1.4% in August from a year earlier, down for the sixth straight month, reflecting a big drop in overtime.

Looking ahead, a relatively quiet calendar.

UK GDP estimates (and a host of August data) will be released at 7AM.

Canadian employment data for September is the only data point with any prospects of displacing the dominant market themes.

BOE's Haldane speaks at 16:15.