Monday’s Market Movement Is China’s Farmers Being Forced Into Cities

The indexes are bouncing this morning! 

Things didn’t look too interesting earlier this morning but now we’ve got our expected and predicted 0.5% weak bounce thanks to CHINA!!! unveiling their plan to push another 100M people into the cities by 2020.  Did I say plan?  More like insane scheme, actually.  

While 100M may not seem like a lot to China, it’s still 8% of their population – that would be like the US moving 8M families to the cities in 6 years.  Imagine the chaos and upheaval, the strain on urban resources and the collapse of the rural areas they leave behind.  

Still, only the good side is being seen by the markets and copper shot up from our bottom call at $2.925 to $2.975 (5%) in the 3 hours following the 3am announcement and global markets jumped 0.5% as computer programs that still think copper is a major indicator began BUYBUYBUYing on what must be some good news somewhere.  

So that’s the nature of the WEAK bounce we’re seeing this morning.  We’ll take it more seriously when it’s a 1% strong bounce and, if that holds – THEN we’ll consider getting on board but a weak bounce off news that China is going insane with infrastructure spending doesn’t give us a whole lot of confidence in the market having any real strength:

The plan repeated previous government statements on allowing farmers more freedom in selling or leasing their land. It gave no timetable or specific targets.

Some smaller cities have already eased their hukou controls, which also tie benefits to a family’s residential status, to attract more rural laborers. But these efforts have only been partially successful because many people prefer to move to large cities for better job opportunities and public services.

The government would expand the coverage of social welfare, including pension and medical insurance, and reduce the costs of paying social insurance, the plan said without giving specifics.

The authorities would also allow local governments to issue municipal bonds and push ahead with a property tax law that would be aimed at boosting revenue to help cover the cost of increased urbanization. The plan also calls for expanding resource taxes to top up local government budgets. There were no specifics on any of these revenue measures, however.