Good morning from Europe.

The Chinese equity trends have resumed this morning after a weak series of trading days. The driver has been the signs of stabilization or improvement in the Chinese profit cycle, with the underlying profits up 4% on the year through April.

We typically favour looking at Chinese profit trends in moving averages due to the volatility and there are indeed signs of stability to be found now, in contrast to the forward expectations, which remain heavily skewed towards continued weakness in earnings growth. Factsets broad market aggregate earnings in China are down 10.5% over the past year, but expectations also look for a continued drop over the coming 12 months, which now seems to contradict on ground trends in China.

Chart 1a: Hang Seng still looks incredibly bullish technically speaking

Chart 1b: The Chinese profit cycle is stabilizing or even improving