Good morning,

  • Chinese imports weak again while export numbers remain unreliable;
  • Chinese inflation unchanged in October but producer prices continue to plummet;
  • Regulators give starting date of 17 November for Hong-Kong-Shanghai Stock Connect;
  • Quiet session expected on Monday with economic calendar providing nothing.

European futures are pointing to a relatively mixed open at the start of the week, taking little direction from the New York close on Friday or the Asian session overnight.

The Chinese data released over the weekend and during the trading session on Monday appears to have had little impact on the markets, which is quite unusual, especially when there’s so little on offer elsewhere. The trade balance figures for October don’t appear to have altered anyone’s view on the state of the economy, although given renewed speculation recently regarding false invoicing in China, this may just reflect a lack of trust in the numbers.

Exports fell to 11.6% last month from 15.3% in October, which may ordinarily have been a cause for concern, but given the inconsistencies in the data recently, it’s very difficult to determine whether the exports figures are actually accurate or not and without that, how can we make an assessment of them. The fall in imports to 4.6% is a little concerning, although weaker commodity prices are likely to once again be the biggest driver of this.

This feeds in to the inflation readings we had overnight, as the latest CPI figures showed no change in prices in October, compared to a month earlier, leading to an unchanged reading of 1.6% on the year. With the producer price index falling 2.2% on the year, again due to weaker prices in commodity imports, this is both positive for corporate profitability while the CPI reading is well below the People’s Bank of China’s 3.5% target, opening the door to further targeted stimulus, It’s win win from the markets perspective.

China was very much the focal point in the Asian session overnight, as securities regulators announced that Hong-Kong-Shanghai Stock Connect will start on 17 November, which is earlier than the markets were expecting, despite being delayed from the initial start date last month. The program allows outside investment in Shanghai-listed stocks for the first time ever, which is a massive deal. This was largely responsible for the rally in Chinese and Hong Kong stocks overnight, rather than any of the Chinese data released over the last couple of days.

Unfortunately, this hasn’t really driven markets higher anywhere else, with markets overall in Asia being quite mixed, along with European futures ahead of the open. The latter may continue to struggle for direction as the start of the week is looking extremely quiet from an economic data perspective. In fact, on Monday there is no notable economic releases from either Europe or the US, with the European session only offering a few minor pieces of data which usually have almost no impact on the markets.

The FTSE is expected to open 12 points higher, the CAC 4 points higher and the DAX 7 points lower.