HONG KONG, July 17 — Asian markets struggled today to build on last week’s rally, with new data showing China’s economy grew less than expected in the second quarter as its post-Covid recovery runs out of steam.
Equities surged last week as news that US inflation slowed more than forecast fanned hopes that the Federal Reserve would soon end its campaign of interest rate hikes.
The advance was also bolstered by pledges from Beijing to introduce stimulus measures for the struggling economy.
However, the scale of the work facing Chinese officials was laid bare today, with data showing gross domestic product expanded 6.3 per cent on-year in April-June, much less than forecast in an AFP survey.
Growth was also sharply down on a quarter-on-quarter basis, which is seen as a better guide to the state of the economy owing to the low base of comparison with last year’s Covid-depressed performance.
The country’s National Bureau of Statistics also said youth unemployment jumped to a record 21.3 per cent in June, adding to months of data highlighting weakness in the world’s number-two economy.
The readings will further stoke calls for authorities to announce more measures to fire growth, having cut interest rates last month.
But while officials have pledged to do more, there has been little concrete out of Beijing so far.
“Asia investors have been greeted by a dismal Chinese data dump to start the week,” said SPI Asset Management’s Stephen Innes.
“But... the data will be viewed through the lens of how it will influence the policy decisions made at the upcoming Politburo meeting in late July. With that in mind expectations should grow that Beijing will do major fiscal soon.”
In early trade, Shanghai fell more than 1 per cent, and there were also losses in Sydney, Seoul, Singapore, Manila and Wellington. Taipei and Jakarta edged up.
Hong Kong was closed because of a typhoon, while Tokyo was shut for a holiday.
The tepid performance today came as investors weighed the outlook for US interest rates after last week’s consumer and wholesale price indexes came in below forecasts.
The readings were seen as giving the Federal Reserve room to wind down its monetary tightening drive, which has lasted more than a year.
While it is expected to hike again this month, there is debate over whether it will then call it a day or announce one more before the end of the year.
“We think it is premature to declare victory on inflation and expect volatility to remain elevated over the near term,” JPMorgan Chase & Co. strategists led by Phoebe White said.
Still, bets that the Fed is close to the end of its cycle have weighed on the dollar in recent weeks, with other central banks still lifting costs owing to stubbornly sticky inflation prints.
The euro last week touched US$1.1248, the highest level since February 2022, while the yen and sterling have also pushed to multi-month highs.
Also in focus is the start of the corporate earnings season, which got into full swing Friday with forecast-topping results and outlooks from banking titans Citigroup, JPMorgan and Wells Fargo.
Finance ministers and central bank bosses from the Group of 20 begin a two-day meeting in India today, where they will discuss ways to bolster the stuttering global economy.
Key figures around 0300 GMT
Shanghai - Composite: DOWN 1.1 per cent at 3,201.76
Tokyo - Nikkei 225: Closed for a holiday
Hong Kong - Hang Seng Index: Closed because of storm
Euro/dollar: DOWN at US$1.1224 from US$1.1230 on Friday
Dollar/yen: DOWN at ¥138.56 from ¥138.82
Pound/dollar: DOWN at US$1.3089 from US$1.3091
Euro/pound: UP at 85.77 pence from 85.76 pence
West Texas Intermediate: DOWN 0.9 per cent at US$74.74 per barrel
Brent North Sea crude: DOWN 0.9 per cent at US$79.15 per barrel
New York - Dow: UP 0.3 per cent at 34,509.03 (close)
London - FTSE 100: DOWN 0.1 per cent at 7,434.57 (close)
— AFP