Rise and shine everyone. Happy Monday.

Plenty of news from China over the weekend. CPI and PPI data was released, coming in lower than expected despite a solid increase in food prices in September. Non-food CPI went into outright contraction. PPI came out at -2.8%. China is contending with deflation and it doesn’t seem like consumption is improving.

Fiscal stimulus measures announced over the weekend didn’t specify an amount and many are seeing that as falling short. Details of China’s stimulus measures are expected to be released following approval by the NPC Standing Committee, possibly by late October. Some analysts suggest additional actions could be unveiled at the Central Economic Work Conference in late November or early December. The measures may include a more aggressive central fiscal deficit and increased debt levels, with the potential for a multi-year stimulus package exceeding CNY 10 trillion, which could extend into 2025 and beyond.

One thing that was released was stimulus for the Local Government in the form of special bonds that can also be used to purchase unsold home. We’ve often talked about how China’s problem is a vicious cycle and the Local Government debt is a major part. This a first step to alleviating that issue, and probably the reason that property stocks saw a bit of a rally.

In other news, Goldman Sachs increased their real GDP forecast for China to 4.9% from 4.7%, but that’s still below the Government’s 5% target. It would seem that at least the Government is finally taking notice of the slowdown though. These policy measures should have been released last year, and yet all they did was a drip feed of measures. Even now, there seems to be some hesitation in opening the floodgates.

By the end of this year, we should know more. However, the one thing we can say is that China continues to be a “trade” instead of an “investment”, if a position at all.

Chart of the Day

Positioning in Financials is heating up after Friday’s JPM earnings.

Calendars

(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)