Summary:
- Equity indices remain skeptical about some upbeat comments we have been offered recently
- China’s inflation stays firm in August. Pork prices skyrocket owing to African swine fever
- UK MPs vote against a Johnson’s idea to hold early elections, the parliament has been suspended as expected
Cautious optimism
Financial markets remain rather cautious this morning despite a slew of positive comments from the US-China trade front we have been offered in recent hours. First of all, US Treasury Secretary Steven Mnuchin said on Monday that both countries, the US and China, made a lot of progress, and Chinese officials’ planned travel to Washington at the beginning of the next month was a “sign of good faith”. Moreover, in his interview in Fox Business Network Mnuchin added that a conceptual agreement on enforcement concerns was worked out. These upbeat comments were supported by further information coming from US President Donald Trump that the US is going to be talking with China as soon as next week. Nevertheless, investors seem to be cautious as major indices in the US closed nearly flat and the similar pattern has also been seen across Asian markets with two exceptions - Australian index falling 0.7% and South Korean KOSPI driving up 0.5%. As far as the latter is concerned, we may notice that the price has already approached its crucial technical obstacle which might slow the ongoing rally.
Start investing today or test a free demo
Create account Try a demo Download mobile app Download mobile app
Buyers would have to break above the upper limit of the channel once they want to continue their rally. Source: xStation5
Chinese inflation stays firm
In August Chinese consumer price index remained unchanged at 2.8% while market expectations had called for a tiny deceleration to 2.7% in annual terms. The prime reason behind such an increase were food prices moving up as much as 10%, with pork prices soaring almost 47% and other meats (beef, mutton and chicken) rising between 11.6% and 12.5%. Fresh fruit prices also contributed to a rise in overall inflation last month by jumping 24% compared to the same period last year. Looking ahead, nothing suggests that upward pressure on food prices could subside given the protracted swine fever outbreak, hence elevated prices could stay in place with risks that some second-round effects will arise sooner or later. Nevertheless, so far so good, and current persistence in Chinese inflation is viewed as driven solely by exogenous factors, that is why the People’s Bank of China chose to cut the reserve requirement ratio on Friday and even more cuts appear to be in the pipeline.
Persistence in Chinese inflation is largely driven by soaring food prices stemming from the African swine fever outbreak which has yet to be eradicated. Source: Bloomberg
In the other news:
-
UK MPs voted against a Johnson’s plan to hold early elections, the Parliament was suspended on Monday as expected
-
Australian NAB indices declined in August, business conditions fell to 1 from 3 and business confidence fell to 1 from 4
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
