Stock markets subdued after weaker than expected Chinese data

Stock markets were subdued on Monday as disappointing Chinese economic data and an interest-rate cut by the country’s central bank complicated the global outlook.

Chinese shares slipped lower, with the CSI 300 gauge of Shanghai and Shenzhen listed stocks dipping 0.1 per cent and Hong Kong’s Hang Seng index dropping 0.7 per cent. In Europe, the regional Stoxx 600 share index added 0.2 per cent. Germany’s Dax lost 0.1 per cent.

US equity futures also declined, with contracts tracking the S&P 500 falling 0.5 per cent. The broad Wall Street index on Friday closed out its fourth consecutive week of gains.

These moves came after Chinese economic data showed that retail sales in the country rose 2.7 per cent year on year in July, while industrial production was 3.8 per cent higher. Economists had forecast larger increases of 5 per cent and 4.6 per cent respectively.

Analysts at Goldman Sachs said that the data showed that the growth recovery since the lockdowns in April and May spurred by the Omicron Covid variant “stalled and even slightly reversed in July”.

“This points to still-weak domestic demand amid the sporadic Covid outbreaks, production cuts in some high-energy consuming industries and adverse impact of recent risk events in the property sector,” they added.

In a bid to boost growth, China’s central bank on Monday cut its medium-term lending rate, through which it provides one-year loans to the banking system, by 0.1 percentage points to 2.75 per cent.

China’s 10-year bond yield dropped by 0.07 percentage points to 2.67 per cent, as the price of the government debt instrument rose.

Elsewhere in bond markets, the yield on the 10-year US Treasury note was steady at 2.86 per cent. Data last week offered signs that inflation in the world’s largest economy may be steadying — a trend closely watched by investors as they attempt to assess how far the US Federal Reserve will raise interest rates to curb rapid price growth.

Market participants on Wednesday will scrutinise minutes of the Federal Open Market Committee’s latest monetary policy meeting for clues about the central bank’s tightening plans, after Fed officials suggested last week that encouraging data did not mean inflation had been tamed.

The EU, Japan and Canada will also publish inflation data this week, while results from companies including Walmart and Target will provide further clues on the health of US consumers. Weak earnings from the consumer bellwethers in May sparked some of the biggest declines for US stocks this year.

In currency markets, the dollar gained 0.3 per cent against a basket of six leading currencies.


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