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China Data Fall Short

Stocks & Oil Down as China Data Fall Short

Asian stock markets fell, and oil prices dropped after the release of China’s disappointing economic data exposed how much lockdowns have harmed the world’s second largest economy.

China’s April retail sales slid 11.1% on the year. Industrial output fell 2.9% in contrast to analysts’ expectations of an increase. The figures show industrial output and consumer spending falling to their lowest levels since the beginning of the pandemic.

Stock Markets Plunge

S&P 500 (US500) stock futures fell 0.6% while Nasdaq futures dropped 0.5%. The S&P 500 recorded 6 consecutive weeks of declines while both US indices are far from their last year’s high. Japan’s Nikkei gained 0.5% while recording a 2.1% loss last week.

Investors are also watching closely how the European markets are going to react to Finland and Sweden’s efforts to join the NATO (North Atlantic Treaty Organization) after the Russian invasion in Ukraine.

China’s Reaction to Dire Data

Officials in China are taking restrained action to boost the economy. They allowed for a further cut in the interest rate for new mortgage loans in an attempt to boost the troubling housing market. While some were expecting a rate easing, Chinese officials did not change the one-year policy loan rate on Monday. The Monday news overshadowed the announcement that Shanghai plans to reopen and return to its normal pace from the first of June.

US Growth Downgraded

Steep inflation and increasing interest rates sent US consumer confidence in early May plunging to its lowest level since 2011, putting the spotlight on the April retail sales data to be published on Tuesday.

Concerns over monetary tightening causing a possible recession sparked a rally in bonds last week. While last week 10-year yields fell 21 basis points from 3.20% highs, they eased on Monday and dropped to 2.91%. The Fed’s hawkish attitude caused Goldman Sachs to lower its GDP growth forecast for 2022 from 2.6% to 2.4%.

Trading Oil

Oil was hit by the weak Chinese data but remains at around $110 per barrel. In the meantime, Shanghai could be close to loosening its six-week lockdown which could lead to increasing energy demand and rising oil prices.

Trading Cryptocurrencies

Cryptocurrencies plunged as investors withdrew from stocks. This left Bitcoin trading below $30,000 at the time of writing.

What to Watch out for this Week:

New York Fed President’s speech
Fed Chair Jerome Powell’s speech
Reserve Bank of Australia May Policy Meeting Minutes

G-7 finance ministers and central bankers meeting
Eurozone CPI
Philadelphia Fed President’s speech

China loan prime rates