Daily Commentary

MarketMinder’s View: China’s National Bureau of Statistics (NBS) released November’s economic data Monday, and readings weakened from October. Industrial output rose 4.8% y/y, slowing from October’s 4.9% and just below expectations, as state-owned enterprises’ output slowed (private firms actually accelerated, per FactSet). Retail sales 1.3% y/y growth also disappointed, cooling markedly from October’s 2.9%. Meanwhile, China’s fixed asset investment decline worsened to -2.6% y/y in the January – November period, on track for its first annual decline in decades. Now the article acknowledges China is still on track to reach this year’s GDP growth target of around 5%, but it warns the foundation is shaky entering 2026 with trade barriers rising and temporary stimulus petering out domestically. We don’t dismiss China’s challenges, but this makes the fundamental error of using retail sales as a proxy for consumer spending. In reality, the majority of consumer spending goes to services, not goods. China’s services output has grown faster than retail sales all year. As for the weakness in industrial production and fixed investment, it is pretty well known that the government is trying to correct the side effects of prior stimulus programs that created excess capacity in heavy industry, particularly among state-run firms that benefited from local government largesse. Recent government comments in state-run media and elsewhere suggest this will be a key focus in 2026. The article uses that to dial down stimulus expectations, but we are already seeing that China can grow and contribute to global growth without aggressive stimulus. That is generally what we think global markets care most about.

MarketMinder’s View: The US and UK’s “deal to make a deal,” signed back in May, has seemingly hit a snag. “The United States informed the British government this month that it would pause fulfilling a technology-related agreement between the two countries, which included more collaboration on artificial intelligence and nuclear energy, according to two people familiar with the decision who were not authorized to speak publicly.” US officials’ main problem, according to reports, is the UK not holding up their end of the agreement in lowering their respective trade barriers. We doubt this is a huge shock for markets, given the long-running publicity and well-known fact the commitments were rather loose. This isn’t the first time things hit a stumbling block. This piece highlights that background, illustrating the lack of surprise power for markets, and notes this is something of a theme globally: “The Trump administration has now struck limited trade agreements with 15 nations in an attempt to change what it perceives as unfair trade practices and boost U.S. exports. But negotiators have often hit obstacles as they have worked to turn verbal pledges between leaders into the text of a trade deal. Some agreements that have been announced verbally have yet to be finalized.” Yet even with these snags, reality is going better than investors feared when Trump first announced tariffs in April—for stocks, this is what matters most.

MarketMinder’s View: Some decent news in the Great White North, as Canada’s headline CPI held at 2.2% y/y in November, below expectations for 2.3%. When removing volatile food and energy prices, the so-called “core” inflation rate eased to 2.4% y/y, down from October’s 2.7%, not far off the Bank of Canada’s target and still well, well below rates seen just a few years ago. In other words, November’s report is more proof that the hot inflation that helped fuel 2022’s bear market is well in the rearview now. This article broadly takes the same view, even as it notes “the breadth of inflationary pressures widened, with about 42% of items in the consumer price index rising above a 3% yearly pace, from 34% previously.” Sure, but that is an interesting observation only and backward-looking to boot. Besides, at any time, some prices will rise as others fall, and some will speed as others slow. Inflation is about the totality of all goods and services prices across the economy, and it is a gauge of whether the economy is overheating. Inflation is always and everywhere a monetary phenomenon of too much money chasing too few goods and services, but with Canada’s M2++ growth at historically tame rates, we doubt inflation has much fuel to resurge from here, and the economy isn’t getting more fuel than it can handle.