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First Up

UPDATED 08/11/2022 09:30

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The ASX200 promised so much more than it finally delivered on Monday although it still closed up +0.6%, well above the psychological 6900 area. Both the US S&P500 Futures and local index gyrated around on hopes and fears that China would abandon its damaging Covid Zero policy sooner rather than later. On Friday hope that they were about to reopen their economy sent stocks, and especially resources, soaring higher but over the weekend comments from Beijing made the optimism appear premature creating a more sombre backdrop for equities.

In a timely fashion yesterday we saw that China’s exports had contracted for October, the 1^st time since the outbreak of Covid – expectations were +4.5% but we saw -0.3%.
A deteriorating local economy must surely at some stage pressure China to rethink its single-mindedness toward Covid.

Tightening economic conditions across the globe are increasing the likelihood of a recession, when combined with Beijing’s insistence to try and eradicate Covid things are grinding to a halt in the world’s 2^nd largest economy – ironically the worse the data gets the more people are betting that Xi Jinping will be forced to find a way to keep face and reverse current policies e.g. the Hang Seng market rallied +2.7%, closing near its highs following yesterday’s weak data.

The key for MM is stocks are currently looking far more likely/capable of popping higher than for most of 2022 plus we feel it’s a matter of when, not if, China performs a policy U-turn.

US equities kicked higher overnight dismissing fears that China might not be able to enjoy a grand reopening while the key as we alluded to above is the markets too short and literally exhausted on the downside i.e. the path of least resistance is now up. The S&P500 ended the session up another +1% helping the SPI Futures point to a solid 0.35% open locally.