China slows

Monday 20 October 2008 - China slows Presented by Andrew Cates + China's GDP slowed to a 9% y/y rate in Q3, some way below the market consensus of 9.7% and about a point or so below the estimate for Q2. Industrial production ? the key metric for the commodity complex - slowed to just 11.4%y/y, 2 percentage points below consensus. Some of this slowdown can be attributed to Olympic-related shutdowns, but not all. + The degree to which the arteries of the financial system are still clogged will still be very much in focus this week with investors naturally keeping a very close eye on money and credit market stress. Over the weekend the WSJ reported that JP Morgan has loaned between USD10-15 bln in short-term unsecured funds to overseers peer at rates between 3 to 4.5%. That in turn could lead to a big drop in Libor today. + The macro calendar is pretty light in the week ahead with hardly any data points to gain (or lose!) inspiration from in the US. Europe sees a raft of business confidence data from various bodies and various countries including the early read from purchasing managers on Friday. We suspect that most of these confidence numbers will be weak. + Partly for reasons concerning still-difficult credit market conditions our asset allocation team suggests that it may still be somewhat premature to re- engage more fully in global equity markets. Current valuations when adjusted for cyclical earnings weakness are only fair and not cheap. Company analysts have actually been raising 2009 earnings growth estimates over the past months when the revision cycle from economists has been moving the other way.

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YouTube | October 20, 2008

Tags:. .financial. .credit. .past. .current. .reasons