A lot of macro data around the world last night into the early morning and while European data missed the mark, China delivered. China continues to deliver and the implications are positive for the commodity space. Meanwhile, the Fed may be asleep at the switch when it comes to inflationary pressures.

Image courtesy Jakob Montrasio: http://www.everystockphoto.com/photographer.php?photographer_id=27445

In China (FXI, quote) the HSBC manufacturing PMI came in surprisingly strong at 50.8 (49.4 in May) and well above consensus readings of 50.4 estimate. The fact that this reading was not the government produced release but from seemingly more credible HSBC should give the China skeptics a little less room to question the validity of the move to industrial expansion.

The release is the first move back into expansion in over six months. In the details, the output sub-index rose to 51.8 (from 49.8 in May), the highest reading since November 2013, and the new order sub-index rose to the highest level since March 2013 (according to Bloomberg).

The data supports our view that the recent “stealth stimulus program” going on in China is paying off, and the PBoC is seeing follow through in the economy.  

Meanwhile, the closely watched Chinese copper (JJC, quote) and iron ore futures traded higher 2.2% and 2.5% respectively this morning continuing a rally in commodity prices.

Remember the fear of China’s copper inventories three weeks ago that caught the attention of media and other dedicated players in the copper space. We said this was noise and maintain that view. The CRB closed last week at 21 month highs with much of this move from the energy sector.

Iron ore and “bulks” miners are overdone to the downside and will continue to see a short covering bid this week.

Finally, Inflation will be a big topic again in the US this week and pressure on the Fed to move is starting to grow.  ProShares UltraShort 20+ Year Treasury (TBT, quote) and interest rate sensitive plays should be a focus for investors. 

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