Asian markets broadly rose on Monday as investors welcomed signs of curbing U.S. inflation, but data showed China’s economic recovery was faltering under Covid-19 restrictions and a sluggish real estate sector. Optimism has waned.
China’s central bank cut key interest rates in an unexpected move on Monday as more data showed weakness in China, the world’s second largest economy.
The figures showed weaker-than-expected growth in China’s industrial production and retail sales in July. Industrial production rose 3.8% year-on-year, but down from his 3.9% in June, well below analyst forecasts.
China’s National Bureau of Statistics warned that “the risk of global economic stagflation is increasing and the foundation for domestic economic recovery is still not solid.”
Beijing’s strict adherence to its zero-corona strategy is hampering economic recovery as snap lockdowns and prolonged quarantines hit business activity and consumption recovery.
“July’s economic data is very worrying,” Raymond Yang, Greater China economist at Australia & New Zealand Banking Group, told Bloomberg.
“The zero-coronavirus policy continues to hit the service sector, slowing household consumption.”
CMC Markets analyst Michael Hewson said July retail numbers confirm how weak consumer confidence remains.
“This weakness in China’s economy is at odds with the government’s struggle to adapt to its zero-coronavirus policy, which has shown little sign of easing on the back of rising cases,” Hewson said.
“The real estate sector has also remained unresolved, with many homebuyers stopping mortgage payments in protest of delays in the completion of new homes.”
Hong Kong fell 0.5% and Shanghai closed slightly lower, wiping out early gains after a mixed session.
Tokyo stands out in Asian trade, rising 1.1% as US inflation concerns eased and GDP data showed Japan’s economy recovering after the government lifted restrictions on businesses due to Covid-19. I’m done with the deal.
Other Asian markets also rallied from Wall Street ending positively on Friday after consumer and producer price data showed a significant drop in inflation.
Sydney rose 0.5% and Taipei rose 0.8%, while China announced it had organized new military exercises around Taiwan as a delegation of US lawmakers visited the island.
Wellington, Manila and Bangkok also rose. Singapore and Jakarta fell while Seoul and Mumbai were closed for public holidays.
Markets are concerned that after two consecutive gains in which the Federal Reserve raised borrowing costs by three-quarters of a percentage point, a further rise of similar magnitude could hurt the economic recovery. increase.
Last week’s signs of improvement in inflation data sparked debate about whether the Fed could turn around more quickly from its recent stance of aggressively moving to raise rates.
Investors are looking to Wednesday’s release of the minutes of the Fed’s last policy meeting in July for clues on the US central bank’s interest rate plan.
“We are definitely heading in the right direction,” Christina Hooper, chief global market strategist at Invesco, told Bloomberg Television.
“It looks like we’ve passed the peak of inflation. The problem is that inflation is still very high,” he said.
Oil prices fell in Asian trade, with WTI at $91.19 and Brent trading at $97.21, with both major contracts down 1% as China’s slowing economic recovery heightened demand concerns.
– Key figures around 0715 GMT –
Tokyo – Nikkei 225: up 1.1% at 28,871.78 (close)
Hong Kong – Hang Seng Index: down 0.5% at 20,081.06
Shanghai – Overall: Flat 3,276.09 (close)
London – FTSE 100: up 0.4% at 7,532.46
EUR/USD: Falls to $1.0236 from $1.0261 on Friday
GBP/USD: down from $1.2135 to $1.2099
EUR/GBP: rose to 84.61p from 84.53p
USD/JPY: fell from 133.50 yen to 133.34 yen
West Texas Intermediate: 1.0% lower, $91.19 a barrel
North Sea Brent crude oil: down 1.0% to $97.21 a barrel
New York – Dow: 33,761.05 (close), up 1.3%