Macro data from China are being watched with great investors attention because they may affect market fears of recession. The upward economic momentum from the beginning of the year has clearly weakened (as priced into the poorly performing Chinese indices), and investors are beginning to see the country as unstable again - including geopolitically. Tensions between Beijing and the U.S. still persist. Taiwan issue remains unresolved and elections on the island looming this fall so perception of risky investing climate in China may be there for longer.
Inflation readings from China, for May:
Start investing today or test a free demo
Open real account TRY DEMO Download mobile app Download mobile appCPI inflation: 0.2% vs. 0.2% forecast and 0.1% previously (in line with expectations)
PPI inflation: -4.6% vs -4.3% forecast and 3.6% previously (surprise)
- Low CPI inflation and surprisingly lower-than-forecast producer inflation, combined with increasingly weak macro data, are raising hopes around potential broader stimulation of the economy by the People's Bank of China.
- China's disinflationary trend also continues at a time of 'global disinflation' - when demand in developed economies falls under pressure from central bank actions.
- China's National Bureau of Statistics attributed the country's overall economic weakness to the trend in global commodity markets and, of course, lower demand.
- The data showed that the commodity and mining industries weighed on the producer price index (PPI), with food, tobacco and alcohol prices mainly responsible for the 0.2% CPI reading.
PBOC Governor Yi Gang indicated that the Bank of China will maintain monetary policy. He did not suggest any big changes - despite signals justifying stimulation of the economy. Yi assured that 5% GDP growth will be achieved this year, and expects inflation to gradually pick up in the second half of the year. Pinpoint Asset Management indicated that China's economy faces a significant risk of deflation. A reassessment of the PBOC's monetary policy could potentially come after the release of Q2 GDP data in July.
Both China's core and CPI inflation are at historically low levels. Source: XTB Research
China's disinflation - PPI has fallen from a record 13.5% in 2022 to -4.6% today. The decline could be positive were it not for the fact that its sharpness is indirectly due to a weaker economy. Source: XTB Research
HKComp Index, M30 interval. The index maintains short-term upward momentum and is still trading above the SMA100 (black line). In the case of declines, potential support may be provided by the level of 19,100 points, set by the 23.6 Fibo retracement of the upward wave from the end of May and previous price reactions. The main psychological resistance is located at the level of 20,000 points. Source: xStation5
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
