Enis’s Macro Wrap – News Flash!!! NKE Says China Slowing

by Enis September 28, 2012 7:00 am • Commentary

As I was listening to the NKE conference call after their earnings announcement last night, I chuckled when I heard that commentary from NKE management.  In case you were living on another planet, they informed investors that China appeared to be slowing.  Here was the geographical breakdown of the futures orders (expected orders for the Sept to Jan13 period), courtesy of Bloomberg:

Global Futures Orders (ex-currency) up 8%, est. up 10% (avg. of 8 estimates):

  • N. America up 13%, estimate up 14% (avg. of 7)
  • W. Europe up 6%, est. up 4.2% (avg. of 6)
  • Central, Eastern Europe up 7%, est. up 6.5% (avg. of 6)
  • China down 6%, est. up 1.2% (avg. of 7)
  • Japan up 7%, est. up 4.7% (avg. of 6)
  • Emerging mkts up 14%, est. up 18% (avg. of 6)

China was the clear outlier across the world.  Surprisingly, Europe was actually a bit of a positive surprise, while emerging markets are also a bit weaker.

The Chinese trade has been unravelling for the past 6 months now, and signs point to continued problems there.  However, trading is always a game of going where the puck is going, not where it’s been.  Everyone is well aware that Chinese growth is under pressure.  The debate in investor discussions should be focused on whether that will eventually affect other regions and industries, or if they will remain insulated from Chinese problems.

Markets overnight:

  • Speaking of China, it actually showed strength for the second straight session, with the Shanghai Composite up 1.5%.  Japan, in contrast, has had a rough week, with the Nikkei down another 1% overnight, bringing its losses on the week to close to 3%
  • European markets initially rallied, but have sold off in the past hour, going from +0.5% to -0.5% on little news.  SPX futures indicate a -0.25% open at 6:50 am EDT
  • Economic data releases heavy today at 8:30 am, in the form of personal income, personal spending, and the pce deflator.  Chicago PMI and UMich Consumer Confidence between 9:40 and 9:55 am
  • Treasuries stronger, while currencies and commodities are close to flat