HomeContributorsFundamental AnalysisChinese Economy At Slowest Pace Since Early 1990s

Chinese Economy At Slowest Pace Since Early 1990s

Market movers today

It is a quiet day on the data release front. A speech by Fed’s William (voter, neutral) ahead of the crucial Fed meeting at the end of July will be in focus. The market is looking for hints on how forceful the Fed’s rate cut will be (25 or 50bp cut). There are set to be more speeches by Fed board members later this week.

In the UK, the leadership contest in the conservative party is heating up ahead of the vote on who should become the next leader of the country. Focus is on the extent to which Boris Johnson can force through a no-Brexit deal by suspending the Parliament.

Later this week, US confidence indicators such as the Philly Fed index will provide fresh signs about the strength of the US companies in July.

Selected market news

Asian equities are mixed this morning as China’s economic releases showed that the Chinese economy slowed to the weakest pace since the early 1990s amid the ongoing trade standoff with the US. Real GDP growth slowed to 6.2% y/y in the second quarter. Meanwhile, industrial production in June expanded by 6.3%, stronger than expected by financial market analysts and faster than in May, indicating that a stabilisation is emerging amid the impact of loosening monetary conditions, evident from Friday’s monetary numbers. In addition, fixed assets investments were stronger than expected in June.

On Friday, US President Trump criticised China for not purchasing enough US agricultural products as agreed at the G20 meeting in Japan earlier this month. The comment underscores the challenges in finding an agreement between the two sides amid considerable distrust between the two sides. Furthermore, Trump is probably encouraged by the buoyant US stock market, where the S&P 500 broke through the 3000 level for the first time last week.

The Turkish lira is under pressure this morning following Fitch’s decision to cut Turkey’s sovereign further to Junk over the weekend. Fitch reduced the nation’s long-term foreign currency debt rating to BB-, three notches below investment grade and on par with Brazil, Greece and Bangladesh. The ratings company warned of deteriorating institutional independence and economic policy credibility after President Recep Tayyip Erdogan unexpectedly removed Cetinkaya as his central bank chief last week. On top of the concerns of institutional independence in the country, there is a looming risk of tightening US sanctions, as the delivery of parts of a Russian missile system is taking place, which has been sharply criticized by the US. We expect the Turkish Lira to weaken in the coming months against the USD.

Danske Bank
Danske Bankhttp://www.danskebank.com/danskeresearch
This publication has been prepared by Danske Markets for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Markets´ research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Markets is a division of Danske Bank A/S, which is regulated by FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright (©) Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.

Featured Analysis

Learn Forex Trading