Chinese stocks rally back towards 2008 highs

Tuesday, April 07, 2015

Chinese benchmark indices rallied back towards seven year highs as investors speculated that the government would step up efforts to support a slowing Chinese economy. Industrials and financials led both the CSI 300 and Shanghai Composite between 1.5% and 1.8% higher overnight, driven by fund investors as regulators remained accommodative to the current market rally which has seen mainland stocks add over 20% since the start of the year. Investors will be paying close attention to CPI and PPI data due out later this week which will offer further insight into the deflationary headwinds facing the Chinese economy while M2 money supply also expected this week will offer investors an assessment of current market liquidity with the current loose monetary environment expected to expand M2 money supply by 12.4% y/y in March.

The dollar index rose tentatively yesterday, building on support at the 40 day MA as the greenback attempted to recover some of the previous week’s losses. Dollar investors have seen the dollar slip back towards 96.00 after touching a fresh multi-year high in March as significant gains were made against the dollar only to see it recover towards 98.6 last week before a three session bear run saw the index shed 2% as investors assessed current market valuations. However, support around current levels remains intact and with activity early this morning pushing the dollar index back above 97.00 we could see further dollar upside in the near term.

 Front month Brent futures rallied back above $58/bbl on Monday, recovering last Thursday’s losses which had seen the global crude benchmark price slip towards $54/bbl as negotiations between world powers and Iran signalled a conclusion regarding its nuclear activities was close. A final deal is expected to be reached by the end of June, provided this milestone is reached market participants are expecting a significant flow of Iranian oil on the world market. With production forecast to have dropped drastically to around 2.8m bpd from 6.4m bpd and exports significantly hampered by the sanctions, any easing of economic conditions could see a flood of crude exports add further pressure to front month Brent futures.

The Shanghai Composite extends gains into Q2

SHSZ300 Index Shanghai Shenzhen 2015 04 07 07 31 05

The dollar index resumes its upward march after a brief correction

DXY Curncy DOLLAR INDEX SPOT 2015 04 07 07 49 22

Events for today

0855

DE

Mar

Markit Services PMI

0900

EZ

Mar

Markit Services PMI

0930

UK

Mar

Markit/CIPS Services PMI

1000

EZ

Feb

PPI

1500

US

Apr

IBD Sentiment

2000

US

Feb

Consumer Credit

All times UK Local Time

 

Topics: Crude oil, Brent, DXY, CPI
More from: Kash Kamal