Chinese CPI data misses expectations

Tuesday, February 10, 2015

Chinese equities rallied strongly overnight leading the charge higher in Asian markets as data showed consumer prices rose at a slower rate than forecast by market participants, sparking increased speculation among investors that the government would embark on further stimulus measures to help prop up the economy. CPI slipped to 0.8% y/y in January, less than the previous month’s reading of 1.5% and expectations of a 1.0% y/y increase according to analysts polled by Bloomberg. Producer prices also experienced significant deflationary pressure with last month’s 3.3% y/y decline in factory gate prices falling further in January by -4.3% y/y. The weaker than expected inflation data prompted investors into mainland Chinese equity indices as the hopes for further stimulus in the form of easing monetary policy spurred investors into risk assets. The Shanghai Composite added 1.5% overnight while the CSI 300 gained 1.82%. With weak domestic demand and falling commodity prices presenting significant headwinds to the Chinese economy, policymakers may wait until after the Lunar New Year holiday which seasonally sees lower trading activity before embarking on any substantial supportive measures.

Spot gold prices managed to build on yesterday’s close gaining support from the weaker than expected Chinese inflation data as prices attempted to target $1,246/oz overnight. Activity this morning has seen these early intraday gains sold back as the yellow metal finds firm support around $1,240/oz. Uncertainty in the eurozone surrounding Greece’s future in the single currency union will also buoy demand for the precious metal with investment demand supportive of any significant retracement as investors take advantage of buying opportunities.

 European stocks struggled to hold onto intermediate levels of support this morning as concerns regarding Greece’s ability to service its debt obligation, the flaring conflict in Ukraine and the weaker than expected Chinese data saw major benchmark indices trade under renewed pressure at the open. Risk appetite has waned in recent sessions and investors may opt to remain on the side lines until further insight can be gained from the Fed Budget on Wednesday and eurozone Q4 GDP data on Friday.  

Chinese CPI slips further in January

CNCPIYOY Index China CPI Yoy 2015 02 10 08 36 49

Chinese producer prices experience sharp declines

CHEFTYOY Index China PPI Yoy 2015 02 10 08 56 45

Gold prices find support on weaker Chinese data

XAU Curncy Gold Spot Oz 2015 02 10 08 53 05

Events for today

0001

UK

Jan

BRC Retail Sales

0130

CN

Jan

CPI & PPI

0930

UK

Dec

Industrial & Mfg Production

1500

UK

Jan

NIESR GDP Estimate

Topics: Gold, EUR, PBOC, CPI
More from: Kash Kamal