Aurelia Butler

BEIJING (Reuters) -China’s new bank loans tumbled in July and other key credit gauges also weakened, even after policymakers cut interest rates and promised to roll out more support for the faltering economy.Chinese banks extended 345.9 billion yuan ($47.80 billion) of new yuan loans in July, tumbling 89% from June to the lowest since late 2009 and falling far short of analysts’ forecasts, data from the People’s Bank of China showed on Friday. Analysts polled by Reuters had expected new loans last month to fall sharply from 3.05 trillion yuan in June to 800 billion yuan, after record lending in the first half as the central bank tried to shore up sputtering consumption and investment.The reading was also much lower than 679 billion yuan in July 2022.While lending in China typically tends to fall back in July for seasonal reasons, the weak credit readings come days after other grim data which showed the world’s second-largest economy slipped into deflation last month while exports and imports plummeted, adding pressure on Beijing to roll out more forceful stimulus measures.”China’s bank loan growth fell to its lowest in seven months in July, while broad credit growth dropped to a record low,” Capital Economics said in a note to clients.”We expect further policy rate cuts (as soon as next Tuesday) and a spike in government bond issuance in the coming months, but unless there is a wider improvement in business and household sentiment, this probably won’t lift credit growth much.”Hobbled by weak demand at home and abroad, China’s economic momentum has faltered in recent months despite strong bank lending in the first half. Household loans, mostly mortgages, contracted by 200.7 billion yuan in July, after rising 963.9 billion yuan in June, as a debt crisis in the property sector deepened, while corporate loans slid to 237.8 billion yuan last month from 2.28 trillion yuan in June, central bank data showed. China’s top leaders pledged in late July to step up support for the economy amid the tortuous post-COVID recovery, followed by a raft of similar pledges from various government agencies. But details so far have been scant, disappointing investors.Central bank officials have pledged to use policy tools such as reserve requirement ratio (RRR) cuts to ensure reasonably ample liquidity.WEAK CREDIT DEMANDThe central bank cut its benchmark lending rates in June by a modest 10 basis points, the first such reduction in 10 months. A number of analysts predict further small cuts this year, but say that may do little to turnaround the economic malaise quickly as long as consumers and companies remain in no mood to borrow.”The poor lending data reflects weak financing demand from the real economy.” said Luo Yunfeng, an economist at Huajin Securities. “It’s not good to force companies to borrow money when they don’t need it.”Some economists have flagged the risk of a balance sheet recession, as Chinese households and private firms build up savings and reduce borrowing and spending after three years of strict COVID curbs.More fiscal stimulus is also expected, with local governments — many of which are already heavily indebted — being told to speed up bond issuance to fund infrastructure projects.Broad M2 money supply grew by 10.7% in July from a year earlier, according to central bank data, decelerating from 11.3% in June and the slowest pace since April 2022. Analysts had expected it to expand by 11%. Outstanding yuan loans expanded by 11.1% in July from the year before, the lowest so far this year, compared with 11.3% growth the previous month. Analysts had expected 11.3% growth.Annual growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, also cooled, to 8.9% in July from 9.0% in June.TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales.In July, TSF slumped to 528.2 billion yuan from 4.22 trillion yuan in June. Analysts polled by Reuters had predicted July TSF at 1.1 trillion yuan. More

1. Futures mixed ahead of producer price dataU.S. stock futures were mixed Friday, as traders digested cooler-than-anticipated U.S. inflation data and looked ahead to the release of a monthly measure of producer price growth later in the session.By 05:21 ET (09:21 GMT), the Dow futures contract added 32 points or 0.09%, S&P 500 futures were mostly unchanged, and Nasdaq 100 futures slipped by 19 points or 0.12%.Underpinning sentiment heading into the last day of trading this week was Thursday’s U.S. consumer price index, which showed that annual headline inflation in the world’s largest economy rose by less than expected in July. On a monthly basis, the reading increased by 0.2% for a second straight month, bolstering projections that the Federal Reserve may soon back away from its long-running campaign of interest rate hikes.More detail will likely be added to the inflation picture today with the publication of the producer price index for last month. Economists estimate that the figure, which gauges the selling prices received by domestic producers, accelerated to 0.7% annually and 0.2% monthly in July. The core number, which removes food and energy, is seen picking up the pace slightly to 0.2% month-on-month, but slowing marginally to 2.3% year-on-year.2. News Corp eyes AIMedia mogul Rupert Murdoch’s News Corp (NASDAQ:NWSA) saw revenue fall by almost a tenth in the latest quarter, dragging the owner of the Wall Street Journal and the Sunday Times down to a three-month loss.The decline was mitigated, however, by the company’s Dow Jones division. The publisher of Market Watch and Barron’s posted segment earnings of $133 million, a jump of 25% and the unit’s best profit since joining News Corp. Meanwhile, Chief Executive Officer Robert Thomson outlined the group’s wider plans to adjust to the emergence of generative artificial intelligence. Calling it a “challenge” to the maintenance of publishers’ intellectual property, Thomson said News Corp is in active negotiations to set a value for its content and IP.But Thomson maintained that generative AI still represents a “remarkable opportunity” to build fresh revenue sources and slash costs.News Corp shares were little changed in premarket U.S. trading Friday.3. Supreme Court halts Purdue Pharma opioid settlementThe U.S. Supreme Court has temporarily blocked the bankruptcy proceedings of Purdue Pharma, casting doubt over whether members of the Sackler family that owns the company can be shielded from any future claims related to the U.S. opioid epidemic.Earlier this year, a lower court approved a deal that would have shielded the Sacklers from potential lawsuits in return for a one-off payment of $6B to victims of the crisis.The Justice Department subsequently asked that the settlement be delayed, claiming that it improperly removes any future liability from third parties for contributing to the crisis. The Supreme Court has now agreed to hear oral arguments in December.Purdue, the maker of opioid painkiller OxyContin, would need the agreement to exit bankruptcy. The company has rebuffed the DoJ’s request, arguing that it would take “billions of dollars” out of opioid recovery programs and eventually make “meaningful recovery” for victims more difficult.4. UBS ends Credit Suisse deal’s state backstopUBS (SIX:UBSG) announced on Friday that it no longer needed government backing worth CHF 9B, or just over $10B, that was put in place to protect the Swiss banking giant from losses linked to its takeover of rival Credit Suisse.The rescue had included an agreement from the state to shield UBS from CHF 9B in losses from the arrangement, as long as it guaranteed to take a hit of CHF 5B.UBS also halted a CHF 100B liquidity backstop that was offered by the Swiss National Bank. The aid was first established during a crisis in March that rocked the country’s banking sector and eventually led to the state-sponsored tie-up between UBS and Credit Suisse.Following a “comprehensive assessment” of Credit Suisse’s non-core assets, UBS said it had concluded that it was not necessary to maintain these liquidity support measures. Credit Suisse, meanwhile, fully repaid a CHF 50B emergency loan from the Swiss government first, UBS added.Swiss-listed shares in UBS climbed Friday.5. Crude hovers around flatlineOil prices were choppy Friday, but stayed mostly around the flatline, with traders trying to judge U.S. inflation data, concerns about a stuttering economic recovery in top crude importer China, and optimistic demand forecasts from OPEC.Thursday’s U.S. CPI release saw the dollar strengthening, hurting the crude market as it makes the commodity more expensive for buyers holding foreign currencies.Growing fears over China’s economy also weighed on oil markets, but this was counterbalanced by the Organization of the Petroleum Exporting Countries confirming on Thursday that it still expects world oil demand to rise by 2.25 million barrels per day in 2024, compared with the growth of 2.44 million barrels per day this year.By 05:22 ET, U.S. crude futures traded 0.4% lower at $82.47 a barrel, while the Brent contract dipped 0.5% to $86.01. More