China A50 Breaks Lower as Producer Prices Hit 26-Year High

Producer prices rose to their highest level since 1996 last month, although consumer inflation is yet to close the gap form runaway factory prices. And this is despite Beijing’s best attempts a curb record high coal prices. To put that into perspective, it was when England last hosted the European Cup and made it to the semi-finals.

The power crunch has forced Beijing to implement output curbs which is exacerbating higher prices, as a time they are trying to keep a lid on runaway prices. Policy-wise, China find themselves in a tricky spot because higher prices limit the amount of easing they may want to implement, despite some form of easing being required to increase domestic demand. According to a Reuters poll, economic growth for China is expected to slow down to 5.2% y/y in Q3, down from 7.9% in Q2 and this will likely be revised lower after today’s figures.

Consumer prices are also starting to turn higher with CPI rising to a 1-year high of 1.5% y/y, and up 0.7% m/m. It’s hardly near the double-digits like producer prices, but it serves as a reminder that inflation is returning and now beginning to hit consumers, ahead of today’s highly anticipated inflation report form the US tonight.

In other yet related news, President Xi and President Biden are to meet next week at their virtual summit. Let’s both presidents are fully alert (or awake, Joe…) for the duration of the occasion

Asian equites were broadly lower across Asian following today’s report. The China A50 is around -1.7% and one of the worst performers of the session. We can see that the resistance zone around 15,700 continues to cap gains and momentum has now turned lower. A bearish engulfing candle formed yesterday, and today’s action has seen prices break trend support.

From here we suspect it will try to head for 15,000
Although we’d expect the 14,847 – 15,000 zone to provide support, initially at least.
There’s also potential for this to run down to the September lows whilst prices remain beneath the broken trendline.

This content will only appear on City Index websites!

How to trade with FOREX.com

Follow these easy steps to start trading with FOREX.com today:

Open a Forex.com account, or log in if you’re already a customer.
Search for the pair you want to trade in our award-winning platform.
Choose your position and size, and your stop and limit levels.
Place the trade.

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.