China Slows PBOC Cuts

Data across the board showed further serious concerns for the trajectory of the China economy.  Japan GDP was a bright spot. While Australia’s Wages growth will worry the RBA.

In coming hours we get US Retail Sales.

Which should be a positive. I mean, if they are not a good number we would be peering immediately into the abyss of recession.

They should be up however and for two very good reasons. Firstly, July was a big goods ‘on sale’ and season travels month. Secondly, it is just the statistical pendulum effect. This is that given all such data is a mere sample survey, what tends to happen is that the data meanders around where reality lay. Rather than representing reality accurately. There is a whole industry built around the excitement of each 0.1% variation in the run of data, but the reality is something we never really get to glimpse. Only get an idea of.

That said, Retail Sales should be ticking up. Market expectations are for an impressive 0.4% in July. Why? Because this is a safe number to the economists in the midst of the two previous prints of 0.5% and 0.2%. They just want to keep their jobs really. However, I believe there is an underlying weakening trend whether it shows up today or not.

Here is my take away. If Retail Sales disappoint on what should be the last good month before further slippage, then it will be a major sell the stock market signal. The ‘spin assassins of reality’; will on the day go all out to turn such a development into “oh, great, this means rate cuts”? Oh…. No. If they get their 0.4% or higher, it will be all about ‘buy stocks’ as it means a firm economy forget the Fed?

Anyhow, it is an important number this time around and it deserves our attention. There will doubtless be significant volatility in the moment, the triggering of stops on both sides of the market by some major price makers to get their easy pay day. After a few hours though, things should settle down and we should get a real trend from here.

It has been a bit of a wishy washy washing machine of late. Some significant downside, but nothing emphatic. In fact, the market looks to be wanting to rally again out of this short term consolidation phase?

Expect fireworks. You shouldn’t be disappointed.

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