China Macro Data Disappoints As MOFCOM Threatens Retaliation For ZTE Ban

With the yuan at its strongest since devaluing in 2015...

and lunar new year distortions starting to wash out of the macro-surprise data... (Monthly data for January and February are often plagued by shifts in the lunar new year holidays in China. For today's March numbers, we should really be past that -- although last week's trade numbers still had a surprise impact.)

Tonight's smorgasbord of Chinese economic data is the first glimpse of the state of the economy as the credit impulse slipped negative and the crackdown on shadow banking (and implicitly leverage) began.

 

Commodities are leading the China bubble for now, with bonds and stocks having been bubbled-through...

And China stocks (red) are notably underperforming their Asia-Pac peers (green)...

 

So, the markets need some hope to cling to and so we strongly doubt GDP will be allowed to miss. Bloomberg notes that the backdrop to today's data is that China is broadly expected to slow somewhat this year, after last year it saw the first acceleration in growth since 2010, when China -- and the rest of the world -- was bouncing back from the global recession.

  • China Q1 GDP YoY MEET at 6.8%, versus +6.8% exp. and +6.8% prior.

  • China Retail Sales YoY BEAT at 10.1%, versus +9.7% exp. and +9.4% prior.

  • China Industrial Production YoY MISS at 6.0%, versus +6.3% exp. and +6.2% prior.

  • China Fixed Asset Investment YoY MISS at 7.5%, versus +7.7% exp. and +7.9% prior.

Notably, China Q1 GDP QoQ disappointed however, rising only 1.4% QoQ (versus expectations of a 1.5% QoQ jump...

So the initial sign is some softening in the industrial part of the economy, and strong growth in the consumer side.

This one will disappoint President Trump: Steel production still growing...

  • First Quarter Crude Steel Output Rises 5.4% to 212.15M Tons

  • March Crude Steel Output Rises 4.5% Y/Y to 73.98M Mt

  • March Steel Product Output Rises 4.2% to 89.77M Tons

Bloomberg's Chris Anstey notes that on the softening in industrial-output growth, Goldman Sachs economists had warned that weather conditions in March weren't favorable for reducing pollution -- so authorities probably put more restrictions on production, construction, and transportation.

Additionally, a new indicator - the monthly survey-based urban unemployment rate will be introduced today, providing a reading on China's labor market.

The NBS may start publishing China's monthly surveyed unemployment rate (SUR) very soon. The government has long been in a dilemma: cares much about employment but lacked an effective gauge. SUR, we believe, is necessary for guiding the economic transition toward high-quality growth. Compiled according to international standards, the SUR defines the unemployed (the numerator) as people of working age (above 16) who are out of work, want a job, have actively sought work in the previous three months and are available to start work within the next two weeks.

Meanwhile, the Hong Kong Dollar remains glued to its peg band's lower limit with HKMA intervention not helping for now...

The Hong Kong Monetary Authority has bought a total of HK$19.02b ($2.4b) worth of Hong Kong dollars since the currency fell to the weak end of its trading band last week, according to data compiled by Bloomberg. This includes HK$9.36b of purchases in the past 24 hours. No need to proactively adjust the local dollar’s interest rates, as that would easily lead to doubts over the city’s determination in defending the linked exchange rate, HKMA says in an emailed statement.

But, despite this statement (raising rates would counter the USD Libor carry trade flows), when  former Hong Kong Monetary Authority Chief Executive Joseph Yam said there IS room for Hong Kong to adjust interest rates and additional exchange fund bill sales can be an option, the dollar strengthened...

 

Finally, it appears the trade wars are anything but fading as China's Ministry of Commerce said in a statement on its website that China has noticed U.S. Commerce Department’s export restriction on ZTE, and will take necessary measures to protect Chinese companies’ interests.

Trading of ZTE shares in Hong Kong suspended from 9am pending release of inside information announcement on the activation of denial order by U.S., it says in filing to Hong Kong stock exchange.

The statement went on to note that ZTE has cooperated with hundreds of U.S. companies and has contributed tens of thousands of jobs in the U.S.; and China hopes U.S. to fairly deal with the matter based on rules and regulations, and ensure fair, stable environment for company.

Comments

Yen Cross Mon, 04/16/2018 - 22:15 Permalink

   So Germany front runs China.

  Once again?  Who wants to short some euros with me?

The November'17 - February '18 eur/usd stretch was 90+ days, [on the daily chart]

 We have plenty of room to run, before any sort of trend change.

 Let's have some fun?

DEMIZEN Yen Cross Mon, 04/16/2018 - 23:32 Permalink

1,2 to 1,3 depends on volatility. 10k of margin/order is my absolute stop I derive my risk from loss limits and include trends and daily ranges.  , I ignore long-term trends, but sometimes manipulate stops according to my eurobearish feel.

I have two brokers .oanda and another outside SEC, I hedge with simultaneous buy/sells defined by daily ranges I read babypips I could adjust levels I have some reserves.  I just trade intraday and usually call the day before the NY opening bell.   I appreciate your gesture of goodwill. my stops are leaning short. 1,2 rr if ticker moves 60 pips south.

In reply to by Yen Cross

DEMIZEN Yen Cross Mon, 04/16/2018 - 23:53 Permalink

it takes a lot of patience to maintain RR, low volatility drives me nuts. sometimes I go days without hitting the buy/sell button just staring at the trends.

I trade margins its forex. but not sure if I understand what is using margin requirements in my favor? I wish I had more control over automation of triggers:

I have set shorts to yield 1,2 and a long target to cover up lot costs if position A hits stops. 

In reply to by Yen Cross

DEMIZEN Yen Cross Tue, 04/17/2018 - 03:26 Permalink

nothing so horribly sophisticated here. I hit stops today at the 25pips profit. I manage to shave enough to stay in the game and grow. I don't depend on withdrawals. When I manage to accumulate enough ( 10x) I will increase my lots, rinse and repeat. I don't know any better and I hate to lose.

 you probably trade your own capital long-term. It will take a streak of hot hand years and a clear global vision to get there. all I see is chaos. I don't know any market makers.

In reply to by Yen Cross

LetThemEatRand Mon, 04/16/2018 - 22:27 Permalink

I love the cognitive dissonance of ZH commentators.  China is an officially communist nation that is now the world's second largest economy but Venezuela is a failed state because it is really communist even though it denies it.  Chinese officials played ball with the bankers and oligarchs to become wealthy beyond their greatest dreams, Venezuelan officials did not.  There's the difference.

LetThemEatRand Yen Cross Mon, 04/16/2018 - 23:46 Permalink

As Stormy Daniels has probably thought (but never said aloud), I wish I was flat.  I am hodling on to my PMs and miners after many years ago losing my ass trying to trade.  Fortunately I'm still a long way from retirement, but if you know any Walmart managers put in a good word for me as a greeter if this shit stays flat for the next decade or two.

In reply to by Yen Cross

LetThemEatRand Justin Case Mon, 04/16/2018 - 23:10 Permalink

I'm not sure from reading your post which "side" of this debate you are on which is fine, because there is no correct side.  Here are a few fun facts:

Xi just became leader for life -- not a system that is worthy of praise.

China's one political party is the communist party.

China has in the recent past directly dictated procreation rights.

China openly has a national facial recognition system run by the state.

China allows foreign investment but insists on Chinese majority ownership in factories.

China's "middle class" is still a tiny fraction of the West's, and what constitutes middle class is largely defined by lower cost of living while a very tiny percentage makes almost all of the money.

America is trying to catch down with China on all of these points.

In reply to by Justin Case

107cicero LetThemEatRand Tue, 04/17/2018 - 09:12 Permalink

Wrong! China has the largest economy on earth, about 25% higher than that of the US.

Don't believe me?

Go to wikipedia for China and look at the PPP numbers which are the most accurate measurement of GDP.

If one, say in China can buy eggs for 20 cents American where it costs $3 buck in America that's where Parity Purchasing Power PPP to show the value of one'as standard of living.

China has had, according to the IMF, the largest economy since 2014.

 

In reply to by LetThemEatRand

Yen Cross saldulilem Mon, 04/16/2018 - 23:32 Permalink

  Qualcomm has been split more times than a stale pineapple.

 After that Broadcom denial, It's going lower. Most of the technology has been licenced, and the commercial R/E  payments are expensive.

 Qualcomm isn't even worth shorting.

  I've looked into breaking it down, but financing costs are too expensive.

 That's what the Chinks just tried to do. [anti trust]

In reply to by saldulilem

HenryHall Mon, 04/16/2018 - 23:28 Permalink

Ban the export, to the US, of any product which contains parts that contain rare earths.

On national security grounds since rare earths can be used to build weapons.