A lot of macro data around the world last night into the early
morning and while European data missed the mark, China delivered.
China continues to deliver and the implications are positive for
the commodity space. Meanwhile, the Fed may be asleep at the
switch when it comes to inflationary pressures.
In China (
) the HSBC manufacturing PMI came in surprisingly strong at 50.8
(49.4 in May) and well above consensus readings of 50.4 estimate.
The fact that this reading was not the government produced
release but from seemingly more credible HSBC should give the
China skeptics a little less room to question the validity of the
move to industrial expansion.
The release is the first move back into expansion in over six
months. In the details, the output sub-index rose to 51.8 (from
49.8 in May), the highest reading since November 2013, and the
new order sub-index rose to the highest level since March 2013
(according to Bloomberg).
The data supports our view that the recent "stealth stimulus
program" going on in China is paying off, and the PBoC is seeing
follow through in the economy.
Meanwhile, the closely watched Chinese copper (
) and iron ore futures traded higher 2.2% and 2.5% respectively
this morning continuing a rally in commodity prices.
Remember the fear of China's copper inventories three weeks
ago that caught the attention of media and other dedicated
players in the copper space. We said this was noise and maintain
that view. The CRB closed last week at 21 month highs with much
of this move from the energy sector.
Iron ore and "bulks" miners are overdone to the downside and
will continue to see a short covering bid this week.
Finally, Inflation will be a big topic again in the US this
week and pressure on the Fed to move is starting to grow.
ProShares UltraShort 20+ Year Treasury (
) and interest rate sensitive plays should be a focus for