Berliner Boersenzeitung - Markets struggle as China growth misses forecasts

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 Monday, with data showing gross domestic product expanded 6.3 percent 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 National Bureau of Statistics also said youth unemployment hit a record 21.3 percent in June and retail sales also missed estimates, adding to months of data highlighting softness in the world's number-two economy.

"China's recovery is going from bad to worse," said Harry Murphy Cruise at Moody's Analytics.

"After a sugar injection in the opening months of 2023 (following the lifting of zero-Covid measures), the pandemic hangover is plaguing China's recovery."

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."

Shanghai fell nearly one percent, and there were also losses in Sydney, Seoul, Singapore, Manila and Wellington. Taipei, Mumbai and Jakarta edged up.

Hong Kong was closed because of a typhoon, while Tokyo was shut for a holiday.

London, Paris and Frankfurt dropped at the open.

The tepid performance Monday 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 $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 began a two-day meeting in India on Monday, where they will discuss ways to bolster the stuttering global economy.

- Key figures around 0715 GMT -

Shanghai - Composite: DOWN 0.9 percent at 3,209.63 (close)

London - FTSE 100: DOWN 0.3 percent at 7,408.98

Tokyo - Nikkei 225: Closed for a holiday

Hong Kong - Hang Seng Index: Closed because of storm

Euro/dollar: UP at $1.1232 from $1.1230 on Friday

Dollar/yen: DOWN at 138.49 yen from 138.82 yen

Pound/dollar: DOWN at $1.3085 from $1.3091

Euro/pound: UP at 85.87 pence from 85.76 pence

West Texas Intermediate: DOWN 1.5 percent at $74.33 per barrel

Brent North Sea crude: DOWN 1.4 percent at $78.73 per barrel

New York - Dow: UP 0.3 percent at 34,509.03 (close)

(B.Hartmann--BBZ)