Daily Posts

G-20 Truce, “Official” June PMIs Released/Caixin Manufacturing PMI

Hope you had a great weekend. I am scheduled to be on CNBC at 1pm EST today so be sure to turn your TV on mute! 

Key News

  • The Trump Xi G-20 truce was better than expected with no new tariffs, China to step up purchases of US agriculture goods and Huawei being spared. Though lacking details, the agreement led to a strong risk on rally in Asian equity markets. Hong Kong was closed today for Establishment Day which should lead to a catch up rally tomorrow. The trade war has been significant overhang for Chinese equities. The Q1 rally was derailed by escalation of the trade war to a new tech war. I would expected Chinese equities to recoup the April and May losses. Chinese equities are at discounts to their historical averages but also at significant valuation discounts relative to US equities.
  • The technology sector was the big beneficiary of the truce across Asia as the trade war’s escalation to a second tech war. CNY gained 34bps versus the dollar.  While weak Manufacturing PMIs are an a casualty of the trade war, policy makers are apt to continue support of the economy which may have contributed to today’s rally.
  • Manufacturing PMI: 49.4 versus estimate 49.5 and May’s 49.4
  • Non-Manufacturing PMI: 54.2 versus estimate 49.2 and May’s 54.3
  • Caixin Manufacturing PMI: 49.4 versus estimate 50.1 and May’s 50.2

Takeaway: The Tale of Two Chinas is alive and well as evidenced by the wide disparity between New (Non-Manufacturing) and Old (Manufacturing) China economic sectors. One almost has to laugh at the headlines describing the “collapse” or “ugly” release as the declines were fairly light though provide a glimpse on why China wants a trade deal. China manufacturing has a big knock on effect on commodities, developing and developed countries’ economies. This is why we’ve seen 2019 global growth estimates from the World Bank, IMF and OECD been slashed and evidenced by the numerous weakening global PMIs today. Markets being forward looking are apt to focus on a potential global recovery in economic data in the quarters to come.



  • Hang Seng – Closed .

The Shanghai & Shenzhen gained +2.22% and +3.46% on very strong volumes 50% higher than both Friday and the 1 year average. Breadth was absolutely spectacular in the strongest day that I can recall with 3,545 gainers and only 113 decliners. Small caps outperformed large caps due to their higher exposure to the technology sector. Both SH and SZ closed above key technical levels of 3,000 on the former and 1,600 on the latter. This The mainland stocks in the MSCI China All Shares gained +3.18% with tech gaining 5.8%, staples, 4.78%, discretionary 3.58%, communications 3.32%, healthcare 3.25% with all sectors in the green. Northbound Connect was closed due to the HK holiday which should make tomorrow an epic inflow day.



  • Locks ups on QTT and BILI tomorrow.
  • CNY 6.84 versus 6.87 yesterday
  • Yield on 1 Day Chinese Gov’t Bond 1.16% versus 1.47%
  • Yield on 10 Year Chinese Gov’t Bond 3.26% versus 3.27%
  • Yield on 10 Year China Development Bank Bond 3.73% versus 3.73%
  • Commodities were ripped higher on the Shanghai & Dalian Exchanges with Dr. Copper +0.55%