No 885 - Opposite directions but similar outcomes

　　原创

　　BANDSFinancial

　　磐石金融有限公司（ BANDS Financial Limited ）在香港注册成立，是一家持有香港证监会（SFC）2号牌照的期货经纪公司，业务涉及中国以外全球大部分活跃期货及期权市场。

　　On Saturday and here I will quote Xinhua directly. “Li Keqiang, a member of the Standing Committee of the Political Bureau of the CPC Central Committee and Premier of the State Council, issued important instructions. The instructions pointed out that stable employment is related to the livelihood of the majority of families and is the key support for the economic operation in a reasonable range. The current employment situation is complex and severe. All regions and departments should follow the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, conscientiously implement the decisions and arrangements of the CPC Central Committee and the State Council, increase the implementation of the employment priority policy, and maintain stable employment and stable economic performance. Keeping market players and securing jobs will win the future. It is necessary to focus on supporting stable jobs, promote enterprises to resume work and achieve production under the conditions of epidemic prevention and control, accelerate the implementation of tax rebates, tax reductions and other burden reduction and relief policies, and help as many market players as possible, especially small, medium and micro enterprises, and individual industrial and commercial households. Overcome difficulties and keep jobs.”Li Keqiang is considered both business-friendly and reform orientated but will retire after two five-year terms as Premier following the CPC Congress slated for October, which will usher in a new leadership team at all levels. Li‘s statement does not refer to the PBOC directly as that was left to Chen Yulu Deputy Governor of the PBOC who also gave an interview to Xinhua on Saturday. The Global Times sums it up. “Amid the headwinds of multiple domestic Omicron flare-ups and global volatility, Chinese economic officials have pledged new monetary tools to help companies weather the current difficulties and strive for a swift resumption of operations, as the country aims for stable economic and social development while fighting the highly transmissible Omicron variant.” It went on to outline that the PBOC plans a re-lending facility equivalent to RMB 100 billion ($15 billion) to support China’s fragile logistics and warehousing sectors. In Shanghai, the PBOC will encourage banks to connect with companies on Shanghai's “whitelist” of firms allowed to resume work. So it would seem the PBOC is looking to dovetail into Li‘s requests and offer bespoke lending to those companies most impacted by covid restrictions. However, a change in monetary conditions is not mentioned.This morning’s People‘s Daily in a front-page article tries to assuage rising concerns around the performance of the economy. The PD points out “We must see that the impact of the epidemic is staged and temporary. With the gradual emergence of the policy effects of efficient coordination of epidemic prevention and control, and economic and social development in various regions and departments, China's economy will soon return to the normal track. We must fully understand and make good use of the comparative advantages and favourable conditions of China’s economic development in many aspects. We have the confidence, ability and conditions to achieve the goals and tasks of economic and social development throughout the year.”Obviously, the situation in China and the concerns of its policymakers are the polar opposite of their US counterparts where Friday's Non-Farm employment figure (actual +425k expected 391k) indicates the US economy continues to grow, straining both employers to find qualified staff and raising wage levels for those that are employed. (US Hourly wages +5.5% YoY) The Non-Farm will only sustain the Fed's hawkish stance as it tries to battle four-decade high inflation at 8.5%. Which is expected to land around 8.1% on its next publication on Wednesday (11th May)Perhaps tangentially highlighting Chinas internal trucking maelstrom, shipping rates from China are falling. In data released on Friday from Drewry the cost of moving a 40ft container from Shanghai to Rotterdam by sea has fallen this year from $13,642 to $9987 (-27%) and Shanghai to Los Angeles has similarly fallen from $9987 to 8564 (-14%). Perhaps suggesting the substitution of Chinese export products for local or alternatively sourced replacements. Such negative sentiment may offset the positive impact of a weaker RMB against the USD which now trading at 6.73 at its weakest level in 18 months.Clearly, the themes in the US and China are running in opposite directions but the outcomes are probably not. The mood will be volatile, but both in New York and Shanghai traders will perhaps be looking to the downside of their markets and asking how low can it now go？

　　Have a good dayRegards John