Chart of the Day
The Chinese credit data for November were out late last week and showed that the flow of credit is picking up again. Our six-month credit impulse, which basically shows the rate of change of the six-month flow of credit, has now turned positive. This is important for many markets, especially commodities, of which China is often the world’s most important buyer. The improvement in credit in China comes at a time when US GDP growth is also accelerating and means we could be in for a strong H1 next year, so long as Omicron does not prove too disruptive.
Check out our Credit Impulse Twitter thread if you want to learn more – retweets appreciated!
🚨🚨🚨A Thread: What are credit impulses and why should you care?
First, let’s focus on China’s credit impulse, as that tends to get the most attention
This chart shows the %YoY change in Chinese credit outstanding. It’s still close to 10% – so not much to worry about? (1/17)
Macro
The big news on Friday was the further rise in US inflation to almost 7%. The surveys point to a moderate slowdown in the coming months.
In the UK, export growth fell in October, but the export surveys are getting much better.
The US University of Michigan Consumer Confidence Index rose by 3.0 points in December.
Markets
China’s 6-month credit impulse might be pointing to a stronger run for Chinese equities.
Speculative positioning in cyclical trades dropped again last week – suggesting investors are not convinced the recent pick-up in US growth will be sustained.
The strength of the US business surveys also contrasts with moves in the S&P 500 – while it has been hitting highs again, the YoY rate has been decelerating.
Yield moves also point to a slowdown in US business conditions – will this time be different?
Ahead of the Fed’s meeting this week, US real 5-year yields have been picking up – though are still low in the grand scheme of things.
Some suggest the weakness of bitcoin can be blamed on tighter monetary conditions. ETH has held up better, though dropped sharply on Friday.
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