Inevitably many Asian markets were fairly muted today following falls in the European/US markets yesterday. Elsewhere Chinese inflation data was quite interesting and I would agree with these insights from Fast FT (with emphasis added by me):
New data showed China's consumer price index rose just 2.3 per cent from a year earlier in June, down from 2.5 per cent in May and well below Beijing's 3.5 per cent target.
The producer price index remained in deflation for a 28th straight month. Factory gate prices were down 1.1 per cent from a year ago, versus estimates of a slower, 1 per cent fall.
Liu Li-Gang, chief economist at ANZ, said the two indices highlight a "risk of deflation" but should provide room for Beijing to "launch more targeted stimulus policies in the second half of this year."
The below chart from Markit has not been updated for the latest data but it puts into context the Chinese data. The key insight is the 3.5% target - and underlying growth of nominal wages (particularly focused in more rural areas) of more than double that:
A couple of final stories. I thought this was interesting on Japan which has helped push JGBs to a one year plus low:
'Cheap funds supplied by Japan’s central bank to boost lending are ending up in government bonds, say traders, exposing persistently weak demand for credit across the world’s third-largest economy'.
QE is no panacea BUT more stimulus seems to me to be needed. Perhaps they need to talk to the ECB about TLTROs and the like...
Finally, Indonesia votes today which is clearly a potential political earthquake - more on this tomorrow as results are declared. Talking about earthquakes, I thought this was a great 'ring of fire' chart - something (unfortunately) all Asia/Pacific investors have to think about.
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