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CPI & PPI Fall Again

Further signs that the Chinese economy is in trouble were seen overnight with the latest CPI reading marking the fastest decline in 15 years. CPI printed -0.8% last month, down from -0.3% prior and below the -0.5% the market was looking for. The data marks the biggest drop since 2009 and underscores the deflationary risks threatening the country’s economy. Along with the fall in CPI, PPI was seen falling 2.5%, marking its 16th consecutive monthly fall.
 

Xi Meeting Regulators

The data is the latest in a string of readings reflecting the poor health of the economy. The Chinese government has taken steps recently to help buffer activity, including specific stock market stimulus aimed at reversing falling prices. However, efforts so far have proved to have a short-lived impact. Xi is now reportedly talking with regulators today with traders hopeful that further measures will be taken on the back of the meeting.
 

Chinese Stocks Rallying

Despite the negative data, Chinese stocks are rallying hard today as traders anticipate fresh stimulus efforts to come in the near term. Some measures are already being announced with state-owned Central Huijin Investment Ltd noting that it will buy more ETFs. With more measures to come, the current recovery rally looks likely to continue for now.
 

Technical Views

Shanghai Composite

(Click on image to enlarge)

The rally in the SHCOMP has seen the index trading back up to retest the broken 2022 lows around 2867.1980. This is a major pivot for the market, with the bear channel highs here also. If bulls can breakout here this opens the way for a run up to 2928.8391 next with 3043.1853 above as a bigger target. 

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