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April 17, 5:00 pm EST Last month we talked about Chinese stocks has a key spot to watch for: 1) are they doing enough to stimulate the struggling economy, and 2) (more importantly) are they taking serious steps to get to an agreement on trade with the U.S.? The signal has been good. Chinese stocks are up 34% since January 4th. As I said back in March, Chinese stocks are reflecting optimism that a bottom is in for the trade war and for Chinese economic fragility. That’s a big signal for the global (and U.S.) economy. Fast forward a month, and we’re starting to see it (the bottoming) in the Chinese data. Overnight, we had a better than expected GDP report. And industrial output in China climbed at the hottest rate since 2014. |
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For those that question the integrity of the Chinese GDP data, many will look at industrial output and retail sales. Retail sales had a better than expected number too overnight. And the chart (too) looks like a bottom is in. |
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Remember, by the end of last year, much of the economic data in China was running at or worse than 2009 levels (the depths of the global economic crisis). The signal in stocks turned on the day that the Fed put an end to its rate hiking path AND when the U.S. and China re-opened trade talks (both on January 4th). |