Futures Flat As Algos Can’t Decide If Chinese “Good” Data Is Bad For Stocks, Or Just Meaningless

The key overnight event was the much anticipated, goalseeked and completely fabricated Chinese economic data dump, which was both good and bad depending on who was asked: bad, in that at 6.9% it was below the government’s 7.0% target and the lowest since Q1 2009, and thus hinting at “more stimulus” especially since industrial production (5.7%, Exp. 6.0%) and fixed spending also both missed; it was good because it beat expectations of 6.8% by the smallest possible increment, and set the tone for much of Europe’s trading session, even if Asia shares ultimately closed largely in the red over skepticism over the authenticity of the GDP results. Worse, and confirming the global economy is now one massive circular reference, China accused the Fed’s rate hike plans for slowing down its economy, which is ironic because the Fed accused China’s economy for forcing it to delay its rate hike.

Not buying the manipulated “data” were both plunging cotton prices which slid to 2009 lows, and Shanghai Rebar, which plunged more than 1% to a record low on Monday, underlining demand pressure in the top consumer of the alloy. China’s crude steel output fell 3 percent in September from a year ago to 66.12 million tonnes amid shrinking domestic demand that analysts say could force more production cuts. “In our view, negative steel margins have no direct bearing on iron ore demand but they do reinforce the need to keep inventories at a minimum,” Goldman Sachs analyst Christian Lelong said in a report. “Amid rising supply and a falling cost curve, we believe the correction in iron ore prices will resume in the short term until marginal producers are forced to exit the market.”

Adding to the noise, Chinese Premier Li said that achieving China’s growth target of about 7% is ‘not easy’ and has urged financial sector reforms to support the economy. Elsewhere, China National Bureau of Statistics spokesman said that China is still growing around 7% Y/Y and the slowdown in the nation is partly due to weakness in the global economy and Fed rate hike expectations.

Chinese data initially lifted both the Shanghai Composite (-0.1%) and the ASX 200 (-0.0%) but weakness in mining names reversed earlier strength, while Nikkei 225 (-0.9%) underperformed albeit off its worst levels as JPY weakened.

European equities kicked off the week on firm footing, with the majority of major indices trading in positive territory (Euro Stoxx: +0.6%), bolstered by the better than expected Chinese GDP reading, despite still printing its lowest reading since 2009 as well as the indices being led higher by financials, after the Deutsche Bank (+3.5%) CEO announced a comprehensive restructuring at the bank. Separately, FTSE (0.0%) has underperformed today, weighed on by mining names, which saw weakness on the back of the Chinese industrial production data (Y/Y 5.70% vs. Exp. 6.00%), which has also weighed on the commodity complex.

In terms of US earnings, today sees Halliburton, Valeant Pharmaceuticals and Morgan Stanley report pre-market, while IBM are set to report after the closing bell.

Bunds initially saw weakness in line with the improvement in sentiment and strength seen in equities, however the German benchmark has now pulled away from their lowest levels of the session after finding support around the 156.40 level which marks the low print from October 14th. While elsewhere, Thursday’s ECB is in focus this week with the majority of IB trading strategies being based on the assumption that this press conference will reveal hints of further easing, which is expected to remain positive for peripheral debt.

In FX, markets have seen commodity related currencies, and particularly AUD, outperform throughout the European session on the back of the aforementioned Chinese GDP reading, while EUR spent the majority of the European session in positive territory on the back of comments from ECB’s Nowotny backtracking on last week’s more dovish comments , with the central banker stating it is too soon to be discussing extending QE past September 2016 and also adding that China’s slowdown will not have a large effect on the Euro area.