1. China’s Central Economic Work Conference is responsible for setting the annual GDP target. Although it was not formally announced, President Xi previously indicated that the goal for the economy to expand by around 6.5% a year through 2020. More telling than the GDP target is the intentions expressed in the new slogan: flexible monetary policy, forceful fiscal policy. For Chinese officials, these are not ends in themselves but means to another end. In this case, the goal is to facilitate structural reforms. A more flexible monetary policy does not only refer to the yuan’s link to the dollar, but also in adjusting the price of money to supply and demand. This is an ongoing process adopting a reference corridor for rates.

Chinese shares have gradually crept higher. On Tuesday, the Shenzhen Composite reached its highest level since mid-July. The 50-day moving average is about to cross above the 200-day average, which is sometimes referred to as the Golden Cross. The Shenzhen Composite closed at 2379. The next major hurdle is seen near 2485. The Shanghai Composite has lagged and is near last month’s highs. While the Shenzhen is above its 200-day moving average, the Shanghai Composite is still a little more than 5% below its 200-day moving average. It closed near 3652. The 3740 area corresponds with a 38.2% retracement of the summer drop.

2. US Q3 GDP was revised to 2.0% from 2.1%, which was a little better than expected. The main source of the downward revision came from a smaller accumulation of inventories. There were two highlights. First, personal consumption expenditures was revised to 3.0% from 2.9%. This is roughly two-thirds of the US economy. This is solid, and being achieved with little new debt. It is being fueled by job creation, small increase in pay, and arguably helped by the lower energy prices.

Second, the core PCE deflator was revised to 1.4% from 1.3%. It has no bearing on November’s monthly report due out tomorrow. The core PCE deflator is expected to be unchanged at 1.3%. The focus, however, may be on the consumption itself, It has disappointed, rising only 0.1 in both September and October. A 0.3% increase in November would go a long way toward dismissing the earlier reports as anomalous (if they are not revised).

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