### Summary
The Australian dollar has weakened significantly against the US dollar, euro, and British pound due to factors such as the US economy's strength, China's weak economic rebound, and a shift in the link between commodity prices and the Australian dollar.
### Facts
- The Australian dollar has reached its lowest level against the US dollar since the global financial crisis in 2009.
- The dollar has also reached its lowest level against the euro since the global financial crisis.
- The value of the Australian dollar against the pound is at its weakest since the Brexit poll.
- The US dollar's strength and expectations of a higher interest rate have contributed to the Australian dollar's weakness.
- China's weak economic rebound and deflation concerns have also affected the Australian dollar.
- The link between commodity prices and the Australian dollar has become less reliable recently.
- The trajectory of Shanghai's top 300 companies share index may indicate the future of the Australian dollar.
- A weaker Australian dollar benefits export industries and overseas visitors, while importers may face challenges.
- A tumbling dollar could support economic growth through increased exports and reduced imports.
📉 The Australian dollar is at its lowest against major currencies since the global financial crisis.
🇺🇸 The US dollar's strength and expectations of a higher interest rate contribute to the Australian dollar's weakness.
🇨🇳 China's weak economic rebound and deflation concerns affect the Australian dollar.
📉 The link between commodity prices and the Australian dollar has become less reliable.
📈 A weaker Australian dollar benefits export industries and overseas visitors.
### Summary
The Chinese economy has slipped into deflationary mode, with retail sales, industrial production, and exports all missing forecasts. Shrinking domestic demand and a debt-fueled housing crisis are the main causes behind this slowdown.
### Facts
- 📉 Retail sales in July grew by 2.5% year-on-year, compared to 3.1% in June.
- 🏭 Value-added industrial output expanded by 3.7% y-o-y, slowing from 4.4% growth in June.
- 📉 China's exports fell by 14.5% in July compared to the previous year, and imports dropped 12.4%.
- 💼 Overall unemployment rate rose to 5.3% in July, with youth unemployment at a record 21.3% in June.
- 📉 Consumer Price Index-based inflation dropped to (-)0.3%, indicating a deflationary situation.
- 🏢 China's debt is estimated at 282% of GDP, higher than that of the US.
### Causes of the slowdown
- The debt-fueled housing sector collapse, which contributes to 30% of China's GDP.
- Stringent zero-Covid strategy and lockdown measures that stifled the domestic economy and disrupted global supply chains.
- Geopolitical tensions and crackdowns on the tech sector, resulting in revenue losses and job cuts.
### Reaction of global markets
- The S&P 500 fell 1.2% following the grim Chinese data.
- US Treasury Secretary warns China's slowing economy is a risk factor for the US economy.
- Japanese stocks and the Indian Nifty were also impacted.
- China's central bank cut its benchmark lending rate, but investors were hoping for more significant stimulus measures.
### Global market concerns
- China's struggle to achieve the 5% growth target may impact global demand.
- China is the world's largest manufacturing economy and consumer of key commodities.
- A slowdown in China could affect global growth, with the IMF's forecast of 35% growth contribution by China seeming unlikely.
### Impact on India
- India's aim to compete with China in the global supply chain could benefit if Chinese exports decline.
- However, if China cuts back on commodity production due to slowing domestic demand, it may push commodity prices higher.
### Summary
The global economy is showing signs of decoupling, with the US economy remaining strong and China's economy disappointing at the margin. The recent data suggests that the US economy is resilient, with consumption and other indicators pointing in a positive direction. However, there are concerns about the bear steepening of the US curve and the repricing of the long end of the curve. In contrast, China's economy continues to struggle, with weak data and monetary policy easing. Japan has surprised with positive data, but there are questions about whether the current inflation shift will lead to tighter monetary policy. Overall, there are concerns about a potential global economic recession and its impact on various economies.
### Facts
- 💰 Despite the decoupling of the US and China economies, concerns remain about the negative impact of a China slowdown on global growth.
- 💹 Recent data show that the US economy, particularly consumption, remains resilient.
- 🔒 The bear steepening of the US curve and the repricing of the long end of the curve are causing concerns.
- 🇨🇳 In China, weak data on consumption and investment and declining house prices continue to affect the economy. The PBoC has eased monetary policy.
- 🇯🇵 Japan's 2Q data surprised with strong export growth, but there are concerns about the impact of a potential inflation shift on global yields.
- 🌍 The global economy is at risk of recession, with concerns about the impact on emerging market economies and the US economy.
### Summary
NatWest expects further downside for the Australian dollar (AUD) due to weak Chinese economic activity, lack of significant policy response, and potential rate hikes by the Reserve Bank of Australia (RBA).
### Facts
- 💪 Higher long-end rates, relative US growth outperformance, sticky front-end Fed pricing, and August seasonals are all factors supporting the US dollar (USD).
- 💼 Incremental stimulus from Chinese authorities may not be enough to halt the fall of AUD, especially with a slowing global growth and lack of FX reaction to China's monetary policy easing.
- 📉 The NWM China Stress Index indicates a further slowing of economic conditions in China.
- 🏗️ Demand for construction-related activities outside of China may fade in the coming months due to higher borrowing costs and reduced steel demand outlook for the US and Europe.
- 📉 Australian employment declined in July, but it's too early to assess the strength of the labor market based on one month of weak data.
- 💰 The increase in prices raises questions about whether CPI inflation in Australia will fall back to the target range.
- 💼 The RBA has retained the optionality for further rate hikes, but weakness in data complicates future rate hikes.
- 🌍 Overall weakness in the Chinese economy will continue to weigh on AUD, but major policy response/stimulus from Chinese authorities could pose a risk to the bearish view on AUD.
- 💼 One more rate hike by the RBA may not be enough to support AUD considering the weakness in China.
China is facing a severe economic downturn, with record youth unemployment, a slumping housing market, stagnant spending, and deflation, which has led to a sense of despair and reluctance to spend among consumers and business owners, potentially fueling a dangerous cycle.
Australia's exports to China, which have been severely impacted by trade restrictions, are expected to improve as some restrictions have been rolled back, particularly for commodities like barley and coal, although challenges remain for industries such as wine.
China's real estate market is experiencing a significant downturn, causing major developers to face massive losses and mounting debts, which is impacting the country's economy and global growth.
China's economic slump is worsening due to the prolonged property crisis, with missed payments on investment products by a major trust company and a fall in home prices adding to concerns.
Chinese authorities have introduced new measures to boost investor confidence in the stock market by reducing trading costs, relaxing rules on share buybacks, and considering extended trading hours and a cut in stamp duty, following recent declines in both the stock and bond markets. These declines have been influenced by China's deteriorating economic outlook, including deflation, weak consumer spending on manufactured goods, rising youth unemployment, and concerns over the property market.
China's weak economy, including an unstable property market and weak consumer demand, is posing risks to global markets and economies like the US, according to experts.
China's economic slowdown, marked by falling consumer prices, a deepening real estate crisis, and a slump in exports, has alarmed international leaders and investors, causing Hong Kong's Hang Seng Index to fall into a bear market and prompting major investment banks to downgrade their growth forecasts for China below 5%.
China's economic model, driven by industrialization and exports, is showing weaknesses with an imbalanced economy, low demand, slumping trade, and a struggling property sector, highlighting the need for structural reforms to boost domestic consumption and confidence.
There are growing concerns that China's economic growth is slowing, and there are doubts about whether the Chinese government will provide significant stimulus to support its trading partners, including Australia, which heavily relies on China as its top trading partner. China's economic slowdown is attributed to various factors such as trade tensions, demographic changes, a property market slump, and the lack of cash support during COVID-19 restrictions. While some experts remain optimistic that the Chinese government will implement stimulus measures, market sentiment is becoming strained, and patience is wearing thin. The impact on Australia's economy and stock market could be severe, particularly affecting mining companies, banks, construction, tourism, education, and listed fund managers.
Australia is preparing for the impact of China's economic downturn, which will lead to lower exports, reduced investment, and a decline in tourism, potentially causing a slowdown in Australia's economic growth.
Australian Treasurer Jim Chalmers expresses concern over China's weakening economy and warns of potential implications for Australia's economy due to the countries' trading relationship and diplomatic tensions.
A potential economic downturn in China may have implications for other countries, but the impact on the United States is expected to be minor due to limited exposure to China's economy.
China's economic downturn is not as severe as many people believe, according to Nicholas Lardy of the Peterson Institute for International Economics.
If China were to slip into a deflationary spiral like Japan in the 1990s, it could lead to a decrease in consumer spending, a weakened economy, and negative consequences for the rest of the world, including a slowdown in imports for the US and adverse effects on developing economies reliant on Chinese exports and investment.
China's economy is portrayed as irrecoverably declining in the eyes of Western mainstream media.
Falling prices in China, driven by a weakened economy, could benefit countries with elevated inflation such as the U.S., India, Germany, and the Netherlands.
China's economic slowdown, driven by a debt-ridden and overbuilt property sector, is not expected to have a significant impact on the global economy or US exports, although a prolonged downturn could have broader consequences. While companies like elevator maker Otis will feel the effects, China's reduced growth is unlikely to be contagious beyond its borders.
The prospect of a prolonged economic slump in China poses a serious threat to global growth, potentially changing fundamental aspects of the global economy, affecting debt markets and supply chains, and impacting emerging markets and the United States.
Fears about the health of the global economy have intensified as service sector activity in China, the eurozone, and the UK shows signs of weakness, leading to a drop in share prices in Asia and a decline in the pound against the US dollar.
Asia stocks fall as weak economic data in China and Europe raise concerns over global growth, while the dollar strengthens as investors assess the outlook for U.S. interest rates.
Chinese stocks have passed the worst of the selling pressure and are still attractive to investors due to their cheap valuation and potential for growth, according to CLSA. However, Beijing needs to address concerns and risks in the economy. The MSCI China Index has fallen this year, but a pause in the Federal Reserve's tightening policy is expected to reverse market pessimism.
Australia's labor market may have peaked as the unemployment rate hovers around historic lows, leaving little room for improvement and potentially opening the door for further job losses, which could negatively impact the Australian Dollar (AUD) that has already been weakening due to slowing Chinese demand. Economists expect an increase in jobs for August, but there is potential for a downside surprise and a second consecutive month of declines.
China's government is downplaying its economic crisis by promoting positive narratives, while social media campaigns and state-run newspapers attack Western media outlets for biased reporting; however, reports suggest that the property sector downturn is causing significant ramifications, and growth projections for China have been downgraded by major banks.
China's macroeconomic challenges, including deflationary pressures, yuan depreciation, and a struggling property sector, could have broader implications beyond its borders, impacting global metal exporters, trade deals, and global inflation; however, investing in China's stocks may offer compelling valuations despite the current downturn.
China's struggling economy, including its deflation and property crisis, will have a significant impact on the US due to its high foreign investment exposure in China and the dependence of key exporting countries like Chile, Australia, and Peru on the Chinese market.
A retreat of funds from Chinese stocks and bonds is diminishing China's global market influence and accelerating its decoupling from the rest of the world, due to economic concerns, tensions with the West, and a property market crisis.
China's economic model is in decline and will have a significant impact on global markets, according to veteran investor David Roche, who predicts long-term struggles for manufacturing-based economies and warns of potential social unrest and geopolitical problems.
The outlook of U.S. companies on China's markets in the next five years has hit a record low due to factors such as political tensions, tariffs, slow Covid recovery, and issues in the real estate market; however, complete decoupling between the two economies is unlikely.
China's economic woes may not be catastrophic as its policymakers and the country's vast resources, coupled with its massive economy and global interconnectedness, offer potential for recovery despite mounting financial and geopolitical pressures.
Chinese stocks defy regional declines as tech stocks rise, while the 10-year Treasury yield slightly decreases from a 16-year high; US futures tick higher following a 1.6% slide in the S&P 500; bond yields rise in Australia and New Zealand after positive US labor market data; and India's sovereign debt is set to be included in JPMorgan's benchmark emerging-markets index.
Gold and silver prices are weaker due to chart-based selling and bearish outside market elements, including a strong U.S. dollar index and high U.S. Treasury yields, while risk appetite is low due to concerns about a possible U.S. government shutdown; however, China's upbeat economic news suggests potential stabilization, and Australia's consumer price inflation has increased.
The Australian share market and broader economy are facing multiple threats, including rising interest rates, cracks in China's property sector, diminishing demand for construction materials, rising oil prices, and global fallout from the US political divide over debt levels, which could potentially result in substantial damage. There are concerns over a potential recession in the US, Australia, and the UK, with investors on edge due to recent volatility in equity markets and the inversion of the yield curve. Uncertainty and mixed signals in the market are leaving investors unsure about the future direction.
China's economy is on the brink of a potential "apocalyptic" collapse that could have disastrous effects on global stock markets, as the country's economic indicators continue to plummet and financial experts warn of an imminent crash.
The Australian dollar is experiencing heavy selling pressure and could potentially fall further against the US dollar as global interest rates rise, with economists warning that a significant drop in the Australian dollar could lead to higher inflation.
Investors tend to overlook the gradual impact of the decoupling between China and the world's two largest economies while focusing on the risk of a potential invasion of Taiwan.
China's trade slump is gradually easing as September's exports fell less than expected, indicating a potential bottoming-out of global trade; however, uncertainties in the property sector and weak confidence among private firms continue to pose risks to the country's economic recovery.
China's weak economic recovery and the risks associated with its property crisis are likely to impact Asia's economic prospects, according to the International Monetary Fund (IMF), leading to a cloudier outlook for the region and potential spillover effects on commodity-exporting countries with close trade links to China. The IMF revised its growth estimate for Asia down to 4.2% for 2024, and emphasized the need for central banks in the region to exercise caution in cutting interest rates due to sticky core inflation and other global factors such as the Middle East conflict. Additionally, the IMF warned that Japan's normalization of monetary policy could have significant global implications.
Japan's economy is vulnerable to China's economic downturn due to a lasting deceleration in Chinese growth, geopolitical tensions, and intellectual property theft from Japanese firms in China, leading to a reduction in exports and negative GDP growth in Asia.
Investors remain pessimistic about the Chinese economy as China-exposed stocks continue to decline, despite signs of improvement.
China's troubled property market is unlikely to recover in the short term, as economic uncertainty and low buyer confidence continue to hamper demand, despite government stimulus measures; home prices fell for the third consecutive month in September, and property sales and investment have also seen double-digit declines.
