China PMI surprised everybody today. The sharp pick up in Chinese PMI sent equities higher.

The economy or not, speculation remains the biggest driver of Chinese equities. As we have been noting over past months, China margin trading continues to climb higher and is spilling over to higher equity prices. For now, all is great. Note how Shanghai (orange) is moving in tandem with China margin trading (white).

The move in Chinese equities is practically a parabolic move, so picking levels is almost impossible. Note there is one level the Shanghai is approaching, but given the momentum and the love for margin trading, any resistance is most likely to be perforated, if nothing, for the short term.

Higher Chinese PMI and a surging Chinese equity market is giving China the upper hand when it comes to the trade talks. Let’s see how that plays out.

Also, noteworthy, is the close correlation between Chinese PMIs and rising German yields. For now, China has the upper hand, surging equity markets, surging PMI and surging speculation…

Source, charts by Bloomberg