Assassination attempt on Donald Trump's life that took place at weekend campaign rally in Pensylvannia is a big news that is likely to remain high on the agenda in weeks or even months to come. However, market impact of this event was rather limited - USD, US yields and cryptocurrencies traded higher, but there was no noticeable reaction on other asset classes. As political developments in the United States are a front page news today, investors may have missed another important piece of information - disappointing data from China released today.
Chinese Q2 GDP report turned out to be a disappointment, showing growth of just 0.7% QoQ, while the market expected 1.1% QoQ growth. On an annual basis, Chinese economy expanded by 4.7% YoY in April-June 2024 period, also lower than 5.1% expected. Monthly activity data for June, which was released simultaneously, came in mixed, with retail sales and urban investments disappointing.
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- Quarterly: 0.7% QoQ vs 1.1% QoQ expected (1.6% QoQ previously)
- Annual: 4.7% YoY vs 5.1% YoY expected (5.3% YoY previously)
China, monthly activity data for June
- Industrial production: 5.3% YoY vs 5.0% YoY expected (5.6% YoY previously)
- Retail sales: 2.0% YoY vs 3.4% YoY expected (3.7% YoY previously)
- Urban investments: 3.9% YoY vs 4.0% YoY expected (4.0% YoY previously)
This was the weakest QoQ pace of growth since Q2 2023, when Chinese economy expanded by 0.5% QoQ. Retail sales reading for June was the lowest since December 2022. Combining this with a better-than-expected industrial production print, it becomes evident that supply-side is driving Chinese growth, while demand-side struggles. Demand in the Chinese economy is struggling, even in spite of a number of government efforts aimed at supporting it. This means that there is a high chance that Chinese authorities will make further efforts to boost domestic demand. The Third Plenum meeting of Chinese authorities, which is expected to set economic and political policies for the coming years, begins this week and investors will look for announcements on how China plans to reinvigorate domestic demand and end the slowdown.
Taking a look at CHN.cash chart at H1 interval, we can see that the index is pulling back today, continuing downward move launched on Friday. Index is down 1% today and has dropped below the 6,435 pts support zone, marked with previous price reaction and 50-hour moving average (green line). Should bears remain in control, the next potential target for sellers could be the 6,350 pts area.
Source: xStation5
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