Main Topic: China's inflation data for July
Key Points:
1. Consumer price index (CPI) fell by 0.3% in July from a year ago, but was up by 0.2% compared to June.
2. Producer price index (PPI) fell by 4.4% in July from a year ago, better than the decline in June.
3. Both CPI and PPI are in deflation territory, indicating weakening economic momentum and lacklustre domestic demand.
### Summary
JD.com, China's biggest ecommerce retailer, reported a 50% surge in net income and 7.6% increase in revenue, beating expectations, due to its low-cost strategy attracting customers during China's economic downturn and increased competition.
### Facts
- 💹 JD.com's net income rose 50% to 6.6 billion yuan ($0.9 billion) and revenue increased 7.6% to 287.9 billion yuan ($39.7 billion), exceeding projections.
- 📈 The company gained market share from rivals including Baidu, Alibaba, and Pinduoduo.
- 💰 Service revenue jumped 30% to 54.1 billion yuan ($7.5 billion).
- 🛒 JD.com attracted more vendors and customers with its low-cost strategy and "10 billion yuan" subsidy program.
- 🗣️ CEO Sandy Xu attributed the solid performance to the company's enhanced business structure and supply chain capabilities.
### China's Economic Woes
- 🇨🇳 China's economy has faced challenges including slowing growth, rising debt, a property bubble bust, and weak domestic demand.
- 📉 Gross domestic product (GDP) rose only 3% last year, the slowest pace in decades.
- 🛍️ Retail sales fell 8% month-over-month in July, with deflation of 0.3% year-over-year, reflecting weak domestic demand.
- ⬇️ Deflation can harm economies by discouraging spending and borrowing, leading to a slowdown in economic activity.
### 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
Asian stocks were mixed as traders awaited the Federal Reserve's summer conference to determine if more interest rate hikes are necessary to deal with inflation.
### Facts
- 📉 Shanghai and Hong Kong stocks retreated, while Tokyo and Seoul stocks advanced.
- 📉 The Hang Seng in Hong Kong lost 1.1%.
- 📈 The Nikkei 225 in Tokyo advanced 0.6%.
- 📈 The Kospi in Seoul gained 0.6%.
- 📊 The S&P 500 index ended the week lower by 0.1%.
- 💵 Some investors are shifting money to bonds as higher interest rates make their payout bigger and less risky.
- 💹 Tech and other high-growth stocks are some of the biggest losers due to higher rates.
- 📉 Ross Stores jumped 5% after reporting stronger-than-expected results, while Estee Lauder fell 3.3% despite reporting stronger profit and revenue than expected.
- ⛽ Benchmark U.S. crude gained 73 cents to $81.39 per barrel, while Brent crude reached $85.55 per barrel.
- 💲 The dollar slightly edged up to 145.35 yen, while the euro rose to $1.0882.
(Source: AP News)
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.
US and UK retail sales, eurozone and Japanese GDP, and eurozone, UK, and Japanese inflation data are highlighted in Fisher Investments' recap of the biggest market, political, and economic news from last week.
Asian stocks, particularly Chinese markets, may find some relief after Wall Street's resilience in the face of rising bond yields, though economic data from China remains underwhelming and foreign investors continue to sell Chinese stocks.
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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%.
Asian markets will be influenced by economic indicators, policy steps, and diplomatic signals from China, as well as reacting to the Jackson Hole speeches, purchasing managers index reports, GDP data, and inflation figures throughout the week, with investors desperate for signs of economic improvement as China's industrial profits continue to slump and authorities take measures to stimulate the capital market.
China's economic slowdown is causing alarm worldwide, with countries experiencing a slump in trade, falling commodity prices, and a decrease in Chinese demand for goods and services, while global investors are pulling billions of dollars from China's stock markets and cutting their targets for Chinese equities.
China's stamp duty and margin cuts revive confidence in the Hong Kong stock market, leading to a rally in stocks such as HKEX, Alibaba, and BYD, while China Evergrande continues to struggle.
Asian markets are expected to start strong following a rally in stocks and risk assets, driven by a softening of the U.S. interest rate outlook and positive economic indicators, although concerns about the Chinese market and inflation remain.
China's economy is not as bad as perceived, with consumer spending picking up and indicating that growth is moving in the right direction, according to an official at the British Chamber of Commerce in China.
Consumer spending in China rebounded in August, with all categories, including apparel, automotive, food, furniture, appliances, and luxury, experiencing increased sales compared to July, according to a survey by the China Beige Book. Retail sales in July rose by 2.5% year-on-year, raising concerns about China's economic growth, but the August survey showed a surge in spending, particularly in the services sector, which saw continued strength in travel and hospitality. Additionally, corporate borrowing increased as the cost of capital declined, indicating a boost in business activity. However, China's property sector continued to worsen, with house prices barely growing and home sales declining.
Asia-Pacific markets rise as investors anticipate China's August factory activity data, with the country's manufacturing sector expected to contract for the fifth consecutive month, while US stocks gain due to positive economic data and revised GDP growth figures.
UBS reports higher than expected profits, job creation in the US slows, and markets rally on weaker economic data and hope for a pause in interest rate hikes. China's factory activity shrinks but at a slower pace, while retail sales increase. There are opportunities for investors in other Asian markets.
Asian stock markets mostly lower as Japanese factory activity and Chinese service industry growth weaken, while Wall Street's benchmark S&P 500 rises on hopes that economic data will convince the Federal Reserve that inflation is under control.
Chinese consumer spending has rebounded in certain sectors, but concerns persist over the property market and GDP growth falling below 5%, according to Shehzad Qazi, managing director of China Beige Book.
Asian shares edged higher as China implemented measures to support its housing sector and stabilize the yuan, with investors cautious pending U.S. jobs data that could influence the Federal Reserve's decision on interest rates.
Asian stock markets rise on the belief that the Federal Reserve has finished raising U.S. interest rates and hopes that policy stimulus from Beijing will stabilize the Chinese economy, while trading remains thin due to a U.S. holiday.
Hong Kong-listed property stocks surged after China's People's Bank of China eased borrowing rules and cut the reserve requirement ratio for foreign exchange deposits, leading the Hang Seng Index to be the top gainer in Asia, with real estate companies such as Evergrande, Logan Group, and Longfor Group experiencing a spike in shares, and Country Garden Holdings leading gains at 14.61% up.
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.
China's economic growth has slowed but has not collapsed, and while there are concerns about financial risks and a potential property crisis, there are also bright spots such as the growth of the new energy and technology sectors that could boost the economy.
Asian markets are weighed down by concerns over high U.S. bond yields, a strong dollar, China's economic struggles, and rising oil prices.
China's consumer price index rebounded in August after slipping into deflation in July, indicating a post-Covid economic recovery, despite sluggish domestic consumption and concerns of a relapse into deflation in the coming months.
China's consumer prices rose slightly and the decline in factory-gate prices slowed in August, indicating easing deflation pressures and signs of stabilization in the economy, although more policy support is needed to boost consumer demand.
Stock prices in Asia were mostly higher as investors awaited updates on U.S. inflation and China's economic data, while concerns about rising oil prices and possible higher interest rates weighed on markets.
Big Japanese manufacturers and the services sector in Japan are experiencing a decline in confidence, with concerns of a slowdown in China's economy affecting global and domestic growth, according to a Reuters poll. The weak sentiment in the business sector raises doubts about the ability of exports to drive economic recovery amid weak domestic demand. Many companies cited high input costs and weak demand as contributing factors, along with geopolitical risks and tensions between the US and China.
Asian stocks rise as US CPI data solidifies Federal Reserve pause bets, leading to a positive market sentiment and a weaker US Dollar.
Asian markets are expected to finish the week strong due to positive movements in the U.S. and Europe, although the release of economic data from China may dampen the mood, as it includes indicators such as house prices, fixed asset investment, and unemployment. The Chinese government is aiming to support the economy, but doubts remain about reaching the 5% GDP growth target and trade relations with the West continue to deteriorate. However, if investors continue with the bullish momentum from Thursday, these concerns may be temporarily set aside.
Asia-Pacific markets rallied after China's August economic data exceeded expectations, with retail sales and industrial production showing stronger growth, although fixed asset investment fell slightly below forecast; meanwhile, the US stock market also ended higher as producer prices increased more than expected.
Chinese economic data showed signs of improvement in August, with retail sales and industrial production exceeding expectations, and key commodities experiencing growth, although challenges remain in the property market.
China is expected to maintain its benchmark lending rates as oil prices rise and market sentiment is affected; meanwhile, the Federal Reserve's policy meeting, Japan's trade data, and the United Nations General Assembly will also influence Asian markets.
China's economy showed positive signs of recovery in August, with an increase in industrial output, retail sales, and consumer inflation, indicating resilience despite concerns of "stagnation" or "collapse" in Western media reports; willingness to spend also recovered, with an increase in residents' income, per capita consumption spending, and domestic tourism; furthermore, China's exports remained resilient, with a steady increase in the export share of intermediate and capital goods, outweighing the decline in the export share of consumer goods.
Asian markets may be bolstered by Wall Street's performance, but concerns regarding the surging dollar, rising U.S. Treasury yields, and troubles in the Chinese property sector may dampen investor enthusiasm.
China's all-sector price index has reached its highest level in 14 months, indicating that the worst may be over for the country's economy and reducing concerns of deflation similar to that experienced by Japan.
Asia-Pacific markets fell ahead of China's industrial data and Australia's inflation figures, while the US experienced a sell-off after disappointing economic data, causing the Dow Jones Industrial Average to fall below its 200-day moving average for the first time since May. Additionally, oil prices continue to rise, putting crude on track for its best quarter in over a year, and Tesla shares dropped after reports of an EU investigation into whether the company and other European carmakers are receiving unfair subsidies for exporting from China.
Asia-Pacific markets climb as traders assess key economic data out of Japan, including the September inflation rate for Tokyo, while oil prices surge to their highest level in over a year due to a decrease in crude stocks and GDP increases by 2.1% in Q3 as the government announces revisions.
China's economy is showing signs of a stronger recovery, with indicators such as increased activity around shopping malls, a pickup in cement manufacturing, and a surge in traffic congestion, suggesting renewed consumer confidence and a positive direction for the construction sector.
Asian markets may receive a boost after the US Congress reached a last-minute deal to prevent a partial federal government shutdown, although Chinese data indicating mixed levels of services and manufacturing activity could hinder the positive sentiment.
Asia-Pacific markets rise as U.S. Treasury yields ease from 16-year highs following weak jobs data, with Japan, South Korea, and Australia all trading higher, while Hong Kong's Hang Seng index looks set for a rebound after losses on Wednesday; Carter Worth, CEO of Worth Charting, predicts lower interest rates and stocks by the end of 2023, contrary to consensus forecasts, while Vanguard's Aliaga-Diaz believes there is a limit to how high yields will go due to rate uncertainty; oil prices fall sharply, hitting their lowest level since September 5.
Hong Kong's Hang Seng index jumps over 2% as investors await US jobs data; Reserve Bank of India keeps interest rates unchanged at 6.5%; Natural gas prices jump 7.3%; Gold touches lowest level since March; OPEC may intervene if oil prices continue to slide.
Hong Kong's economy has shown steady improvement since the beginning of the year, with consumer spending reaching 90% of pre-pandemic levels and an increase in the number of European firms opening offices in the city, according to Financial Secretary Paul Chan Mo-po. However, he also highlighted that external factors such as high US interest rates and global geopolitics would continue to influence the city's relatively small economy.
Asian shares mostly fell amid concerns about the U.S. banking system and Chinese economic growth, with Japan's Nikkei 225 down 0.2% and Hong Kong's Hang Seng down 0.4%, while China's export data showed the sharpest decline in three years. Bank stocks in the U.S. also fell after Moody's cut credit ratings for 10 smaller and midsized banks, citing concerns about their financial strength in light of higher interest rates and the work-from-home trend. The Federal Reserve's efforts to combat inflation by raising interest rates have led to a slowdown in the economy and hit banks hard.
Most Japanese companies expect a continued slowdown in China's economy until 2025, with many looking to shift production to other markets, according to a Reuters poll, despite recent signs of recovery in China's economic activity.
