China CPI is expected to print 1.7% tomorrow, down from
an inflation level of 6.3% a year ago, opening up further room
for Chinese authorities to stimulate the economy (
). Despite this bullish outlook, Anglo-Australian miner Rio Tinto
) is unlikely to benefit in the short term.
Full transcript follows below the video:
Australian miner Rio Tinto reports earnings tomorrow and China
will release data later on. Tim, always good to see you. Are you
in this trade and what are you expecting them to report
The commodities space has clearly rallied along with markets.
Some of these names have been so oversold that you've seen the
best rallies in steel, iron ore, and coal names. I think Rio
Tinto's numbers are not going to be good for those looking at
near term prospects. The reason we mentioned China is because it
is going to release China CPI, which is expected to come in
around 1.7%, down from six and a half a year ago. This means
Chinese policy has a lot of room to stoke the fire, and
ultimately get the commodity rally going again. But we've said
many times, it's not going to be like 2008. But Rio Tinto,
primarily an iron ore producer, steel prices have not rallied
here. If you look at the CRB and the move off the lows, which is
very impressive off the last two weeks, it's not coming from the
component that people want to see here.
So, at the end of the day Tim, China has indicated that it
stands ready to do more and that's the expectation of a lot of
China strategists. If China CPI comes in weak, what sort of
market reaction do you expect on the back of that? Do you expect
a rally because that would further the belief that China would
come in and give the economy more stimulus?
Correct. Many people are waiting for the China CPI number as
at least another support valve for China to make another rate
cut. We've noted they've cut twice in the last six weeks. If
you're playing this here though, Rio Tinto -- I don't know
they're going to be able to tell you a lot on outlook, even
though I think China is reheating the oven and I think that the
fourth quarter in China is going to start to bring significant
new steel production online. That will be supportive. Rio Tinto's
not seeing it here. I would be taking profits in a lot of these
names that have run 20 or so percent. They're [Rio] not going to
tell you anything tomorrow that's going to tell you their
business has changed.