China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen
Economics / Global Economy Jan 04, 2019 - 04:09 PM GMTBy: FXCOT
We had noted of the coming storm in equity markets worldwide in our research to clients. A part of that research can be found herE: The coming storm . Also here: We did say. We also had noted of the fall in USDJPY rom 113 to 110 levels. But the pair fell even more and wiping away billions in retail margins.
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Apple issued a downgrade in sales guidance voicing concerns about Chinaese growth numbers. We take a look at the situation. Chinese Economy Slowdown
Auto sales saw their steepest drop in nearly seven years in November—the fifth straight monthly decline. The slump sets the world’s largest auto market on track for the first annual sales drop since 1990.
China’s economy slowed to the weakest pace in nearly a decade in the third quarter and is expected to slow further in the coming year. Economists expect gross domestic product to fall to 6.4% in the fourth quarter, down a tick from third-quarter growth of 6.5%.
Earnings at Chinese industrial companies fell in November for the first time in nearly three years on the back of slackening demand. Industrial profits registered double-digit growth in 2017, but have been cooling since May last year, hit by subdued factory price gains and slower sales.
China’s key manufacturing sector contracted in December, ending about two years of expansion, with official and private gauges slipping amid sagging demand. The downbeat PMI readings suggest China’s economic growth likely decelerated further in the final quarter of 2018 and the slowdown is expected to continue this year.
The chinese property sales have continuously plummeted. The govertnment is weighing easing measures however it could be a case of too little too late.
Retail-sales growth—which has been fairly resilient during previous slowdowns—dropped to its lowest level in more than 15 years in November. And the government’s efforts to cut personal income tax has failed to lift spending.
Consumption-tax revenue fell 61.6% from a year earlier and then dropped 71.2% in November. Consumption tax in China is imposed on luxury goods such as high-end cosmetics and jewelry, and items deemed environmentally unfriendly, like cars and gasoline. Rich consumers are backing away which is a terrible sign for the economy.
No matter which way data is sliced, the Chinese economy is imploding.
China: Painful fall
The Shanghai stock index has been falling since mid 2018. It has fallen more than 30% in less than 1 year.
India: Waiting for the crash
We see the most rewarding shorts to be had in Indian markets. India is overpriced by magnitude of at least 20%. Much of the market is supported by public banks and institutions. But a forceful move under key support will see a crash of over 20%. We see the Nifty index to hit 8500 before May 2019. Earning data has been lagging. There is a drying of fund flow for new projects and the govt -RBI spat has not yet been priced in.
US Dollar
We see a forceful rally in US dollar in 2019. The move will propel the dollar above 100 possibly before June 2019. However, we also see the US dollar post the rally to fall to 80 as the FED WILL be forced to cut rates again and possibly into negative territory in a hurry. We do not see any rate hikes in 2019. The worsening global economy will have a debilitating impact on US economy and will see job losses and consumer spending falling. Things are about to get a lot worse for US markets and economy.
USDCHF
USDCHF has been consolidating at 9850 and the fall from 1.0050 has been arrested. It does seem there is a strong upleg left on USDCHF before it falls back to 9500.
USDJPY
The bellweather of risk sentiment in the world has toppled over below 110.Many margin accounts has been wiped cleaned.
S&P500
We have had multiple reports been published about the impending move in S&P500 to 2400. It has now come to pass. We see more and severe pain to follow. Dollar to surge and yen to rally. Things are about to get painful until mid of 2019.
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Teamcot
FXCOT is Investment Management firm specializing in futures and forex trading. We run a high return trading system for our premier clients. The trading systems uses four different strategies to take advantage of various market conditions. We also send daily trade setups and economic commentary.
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