China’s Steadying Inflation Leaves Door Open for Monetary Easing


Comments of the Day

10 January 2020

Video commentary for January 9th 2020

Eoin Treacy’s view

A link to today’s video commentary is posted in the Subscriber’s Area.

Some of the topics discussed include: Bigger Asian markets playing catch up. Europe also steadies, oil steady, Dollar at first area of resistance, Wall Street breaks out.

China’s Steadying Inflation Leaves Door Open for Monetary Easing

This article from Bloomberg News may be of interest to subscribers. Here is a section:

“The PBOC is likely to continue to use interest rate and liquidity tools to loosen monetary conditions in 2020, though the easing will probably be less pronounced than last year,” David Qu, a China economist at Bloomberg Economics in Hong Kong, wrote in a note. “We expect the PBOC to stick to a stance of measured easing to counter the economic slowdown.”

For the year, consumer inflation for 2019 stood at 2.9%, in line with the government-set target of 3%, while producer prices declined 0.3%. Core inflation, which removes the more volatile food and energy prices, stabilized at 1.4% in December, signaling ongoing weakness in the broader economy.

China’s economy has shown signs of recovery in recent months as global demand steadies and trade tensions ease. As commodity prices rise and factories start restocking, PPI deflation is set to continue to moderate and some see it turning positive as soon as January.

Eoin Treacy’s view

The outlook for the Chinese economy represents the lynchpin for the global reflation trade and the prospects of steadying growth and continued stimulus are helping aid in the positivity surrounding the hiatus in the trade war.

Deloitte-Ballard Joint White Paper Assesses Hydrogen & Fuel Cell Solutions for Transportation

This press release may be of interest to subscribers. Here is a section:

Randy MacEwen, Ballard President and CEO said, “In less than 10 years, it will become cheaper to run a fuel cell electric vehicle (FCEV) than it is to run a battery electric vehicle (BEV) or an internal combustion engine (ICE) vehicle for certain commercial applications.”

Although FCEVs are currently more expensive to run per 100 kilometers (km) than BEVs and ICE commercial vehicles, they are set to become much cheaper as manufacturing technology matures, economies of scale improve, hydrogen fuel costs decline and infrastructure develops. Indeed, the white paper conservatively estimates the Total Cost of Ownership (TCO) for commercial hydrogen vehicles will fall by more than 50% in the next 10 years.

Eoin Treacy’s view

Economics 101 dictates that when the price of a vital commodity falls precipitously industrious people find a way to use more of it and particularly as a substitute for higher priced commodities. Natural gas is the primary feedstock for creating hydrogen. The price is back testing the $2 level which is close to the lows of the last decade and approximately levels seen ahead of the commodity bull market.

Fiat Will Effectively Fund Tesla’s German Factory, Baird Says

This article by Gabrielle Coppola for Bloomberg may be of interest to subscribers. Here is a section:

Chief Executive Officer Elon Musk announced in November that Tesla planned to build a plant outside Berlin. The facility is expected to produce Model 3 sedans and Model Y crossovers starting in 2021.

Fiat Chrysler is going to launch a new version of its Fiat 500 battery-powered vehicle in Europe this year, along with plug-in hybrid versions of its Jeep Compass, Renegade and Wrangler models. That, combined with the Tesla credits, should make the company compliant with Europe’s emissions rules, CEO Mike Manley told analysts in July.

While Fiat Chrysler would otherwise struggle to meet new carbon-dioxide emissions standards in Europe, the so-called open-pool option available in the European Union allows automakers to group their fleets together to meet targets.

Compliance has gotten harder for automakers as consumers have shifted toward gasoline cars, which emit comparatively more CO2, following Volkswagen AG’s diesel-emissions scandal that first erupted in 2015.

Eoin Treacy’s view

Getting your competitors to pay for a factory, which you will then use to produce cars aimed at putting them out of business is a narrative that is so farfetched it would be unlikely to ever pass muster as a movie script. Yet, it is reality in the growth killing market designed by the bureaucrats ruling the EU. Is it any wonder the UK voted to leave?

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