Ugly import and export data in China triggered a global equity market selloff yesterday as investors feared a slowdown in global growth.
Now let's back up a bit. This past April China announced growth of 6.8% for the first quarter, down slightly from 2015's 6.9% reading. A slew of headlines and analysts came out of the woodwork arguing "targeted stimulus" would be the panacea helping to stabilize growth. The China "bottom is in," they proclaimed.
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CBS: Has China's slowdown bottomed out? (4/15/2016)
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CNBC: China's growth holds up as stimulus bears fruit (4/14/2016)
- Reuters: China economy posts weakest growth since 2009 but recovery signs emerge (4/15/16)
Contrary to mainstream media views, Hedgeye Senior Macro analyst Darius Dale wrote (on 5/2/2016),
"Our analysis renders us firmly on the other side of such hope that China accelerates from here and effectively resuscitates global demand growth enough to stave off continued macroeconomic and microeconomic deterioration in the U.S."
Here's China's (abysmal) trade data reported yesterday for September:
- Exports -10%
- Imports -1.9%
On the news, Dr. Copper (a commodity-market proxy for global demand) resumed its long-term bear market, trading back down to $2.11/lb (see chart below). Meanwhile, China's Shanghai Composite is down -13% year-to-date.
We reiterate our call that Global GDP (and cyclical demand) is entering its slowest part of the cycle (Q4 and Q1). In other words...
the bottom is not In. Not Yet.
