Chinese stocks are soaring this evening on news that the economy continued to expand in May. The Chinese Purchasing Managers Index came in at 53.1. Stocks in Shanghai and Hong Kong are rallying nearly 3% on the news. Some quotes from Bloomberg:
“The Chinese economy is well on track for recovery and economic growth is picking up steam,” said Lu Ting, an economist at Merrill Lynch & Co. in Hong Kong. “The PMI may trigger a rally for asset prices, especially commodity prices.”
“For the first time the PMI shows genuine evidence that policy really is gaining traction,” said Eric Fishwick, head of economic research at CLSA in Hong Kong. A jump in orders and declines in companies’ inventories suggest “sustained output growth in months to come.”
“Economic growth may continue to pick up in the future as accelerating investment and consumer demand boost industrial production,” Zhang Liqun, an economist at the State Council Development and Research Center, said in a statement with the official PMI. Zhang said that while business sentiment remains “weak,” a PMI reading above 50 shows that “the economy will continue to recover.”
Expect this to give a boost to U.S. and European stocks in the coming hours….
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
prescient11
I have yet to hear exactly why inflation would be a good thing. Does anyone really think these companies have pricing power to the consumer. Apart from necessities, what else is going to be passed through to the consumer. I find it laughable that as UE hits 10% this summer and 11% by the end of the year, that even if it happened, inflation is going to be a good thing.
TPC, I would close out that Yen trade and head the other way if it hits 92-93. I know I will.
HankB
you cant be so blindly bullish in the short term. you might be right in the long term , but for now youre stepping in front of a train.
HankB
blindly bearish i meant. how do i edit?
prescient11
Number one – I am not blindly bearish. Just bearish.
Number two – of course this train has been heading our way for three frigging months. I’ve simply got a feeling it’s gonna arrive at the station and reverse course very, very soon. And I mean months.