A look at the day ahead in European and global markets from Ankur Banerjee
A star-studded line up of economic events in Asia on Tuesday has kept investors busy, and jittery, with markets weighed down by yet another set of weak economic data from China, a day after contagion fears in the property sector also battered sentiment.
Data on Tuesday showed China’s industrial output and retail sales growth slowed in July, adding to concerns about a faltering post-pandemic recovery in the world’s second-biggest economy.
Less than an hour before the data release, China unexpectedly cut key policy rates for the second time in three months, which analysts said opened the door to a potential cut in China’s lending benchmark loan prime rate (LPR) next week.
And so, MSCI’s broadest index of Asia-Pacific shares outside Japan was pinned near one-month lows, while the yuan dropped to its lowest in 9-1/2 months. China’s major state-owned banks stepped into the spot market to steady the currency, according to sources.
Chinese policymakers last month released a batch of stimulus measures, including boosting auto and home appliances consumption, relaxing some property restrictions, and pledging support to the private sector. But investors, it seems, want more.
Meanwhile, Japan’s economy grew much faster than expected in April-June, as brisk auto exports and tourist arrivals helped to offset the drag from a slowing post-COVID consumer recovery.
That surprise though barely moved the yen, which is now firmly on the weak side of 145 per dollar – the level that prompted intervention last year.
While intervention is the watch word again regarding the yen, Japanese authorities have expressed more worry about the speed of currency movements than about specific levels. Still, where the line in the sand is drawn remains to be seen.
Over in Australia, wage growth held steady in the June quarter while the pace of annual pay awards unexpectedly slowed. That, along with the release of dovish minutes from the central bank’s July policy meeting, bolstered bets that the RBA would keep rates steady.
In the corporate world, Warren Buffett’s Berkshire Hathaway has taken a stake in U.S. homebuilders DR Horton, Lennar and NVR, a regulatory filing showed.
The timing is curious as rising interest and mortgage rates have dented demand but Berkshire expects construction activity to rise due to low inventory of homes for sale.
Key developments that could influence markets on Tuesday:
Economic events: Inflation data from Sweden, UK labour data
(Reporting by Ankur Banerjee in Singapore; Editing by Edmund Klamann)
