MARKET BRIEFING – LONDON OPEN 19.10.2015
This morning’s news that Chinese growth data continues to decline has somewhat overshadowed the start of an official and high-profile visit by the Chinese President to the United Kingdom.
With growth rates exceeding 6%, most countries in the West would look with considerable envy at first glance what appears to be the very healthy growth numbers.
However, this morning’s announcement by the National Bureau of Statistics that Chinese quarterly GDP had dropped from 7.0% to 6.9% would be weighing on the mind of President Xi Jinping during his meetings with British Prime Minister David Cameron.
There was an expectation that that this morning’s Gross Domestic Product release would be lower than July’s release. However, the decline was less than the 6.8% that the market had expected. This had the effect of limiting the decline in Asia equity markets such as the Shanghai Composite, Hong King Hang Seng and Japanese Nikkei Index.
The drop off in growth has significance from an emotional standpoint in that the drop beneath 7.0% takes Chinses GDP to levels last seen at the beginning of 2009.
This follows a downgrading of 2014 from 7.4% to 7.3% which is the lowest level of GDP for 25 years. For 2015, the Chinese Governments growth target is in the region of 7%.
Although, in comparison to the rest of the world, growth numbers in the region of 7% are still very impressive, there was many who feared that the Chinese economy risked a hard landing.
That the decline was less than expected does lend itself to the view that the action taken by the Chinese Government to limit the impact of the recent slowdown will avert the risk of this hard landing taking place.
The Chinese Government, the Central Bank and Financial Regulators still have to address the big issues of ever increasing non-performing loans, industrial overcapacity and a lack of demand from the outside world for domestic produce.
Although this morning’s GDP number would have given both Chinese Government and the markets much encouragement there is still concern that the growth number could slip to 6.5%. If such a scenario was to play out the impact on jobs would be both measurable and painful.
The Chinese Government has already embarked on an aggressive program of stimulus. However, the benefit so far would seem to be one of delaying the inevitable much steeper slowdown.
The question many now are asking is what more can the Chinese authorities do in terms of stimulus and would further and more aggressive action bring the level of GDP back above 7%.
EURUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.1445
Target 2: 1.1260
Projected range in ATR’s: 0.0093
Daily control level: 1.1395
GBPUSD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.5545
Target 2: 1.5330
Projected range in ATR’s: 0.0107
Daily control level: 1.5410
USDJPY
The intraday technical outlook
Trend 1 hour: Down
Target 1: 120.10
Target 2: 118.60
Projected range in ATR’s: 0.75
Daily control level: 120.35
USDCHF
The intraday technical outlook
Trend 1 hour: Down
Target 1: 0.9600
Target 2: 0.9345
Projected range in ATR’s: 0.0083
Daily control level: 0.9555
USDCAD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.3010
Target 2: 1.2795
Projected range in ATR’s: 0.0108
Daily control level: 1.2950
AUDUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 0.7415
Target 2: 0.7235
Projected range in ATR’s: 0.0088
Daily control level: 0.7365
GOLD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1192.80
Target 2: 1160.00
Projected range in ATR’s: 16.32
Daily control level: 1185.00
OIL
The intraday technical outlook
Trend 1 hour: Up
Target 1: 49.00
Target 2: 46.10
Projected range in ATR’s: 1.84
Daily control level: 45.75
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