Aurelia Butler

Stock markets were subdued on Monday as disappointing Chinese economic data and an interest-rate cut by the country’s central bank complicated the global outlook.US equity futures declined, with contracts tracking the S&P 500 falling 0.5 per cent. The broad Wall Street index on Friday closed out its fourth consecutive week of gains. Contracts tracking the technology-heavy Nasdaq 100 gauge slipped 0.3 per cent lower.In Europe, the regional Stoxx 600 share index added 0.1 per cent. Germany’s Dax lost 0.1 per cent. Elsewhere, Chinese shares slipped lower, with the CSI 300 gauge of Shanghai and Shenzhen-listed stocks dipping 0.1 per cent and Hong Kong’s Hang Seng index dropping 0.7 per cent.These moves came after Chinese economic data showed that retail sales in the country rose 2.7 per cent year on year in July, while industrial production was 3.8 per cent higher. Economists had forecast larger increases of 5 per cent and 4.6 per cent respectively.Analysts at Goldman Sachs said the data showed that the growth recovery since lockdowns in April and May spurred by the Omicron Covid variant “stalled and even slightly reversed in July”.“This points to still-weak domestic demand amid the sporadic Covid outbreaks, production cuts in some high-energy consuming industries and [the] adverse impact of recent risk events in the property sector,” they added.In a bid to boost growth, China’s central bank on Monday cut its medium-term lending rate, through which it provides one-year loans to the banking system, by 0.1 percentage points to 2.75 per cent.Commodities markets turned lower, as signs of slowing growth in China raised the spectre of a drop in demand for industrial metals. Copper prices, a barometer of global growth because of the metal’s widespread use, fell 2.5 per cent on Monday.“Usually the Chinese economy has been an important pillar in supporting the global economy. This time, the US and Europe are showing signs of slowing and possibly moving into a recession but the backdrop — China — isn’t there to support the global economy,” said Aneeka Gupta, director of macroeconomic research at WisdomTree. China’s 10-year bond yield dropped by 0.07 percentage points to 2.67 per cent, as the price of the government debt instrument rose.Elsewhere in bond markets, the yield on the 10-year US Treasury note dipped 0.02 percentage points to 2.83 per cent. Data last week offered signs that inflation in the world’s largest economy may be steadying, a trend closely watched by investors as they attempt to assess how far the US Federal Reserve will raise interest rates to curb rapid price growth.Market participants on Wednesday will scrutinise minutes of the Federal Open Market Committee’s latest monetary policy meeting for clues about the central bank’s tightening plans, after Fed officials suggested last week that encouraging data did not necessarily mean inflation had been tamed.The EU, Japan and Canada will also publish inflation data this week, while results from companies such as Walmart and Target will throw up further indicators about US consumer sentiment. Weak earnings from the bellwethers in May sparked some of the biggest declines for US stocks this year.In currency markets, the dollar gained 0.6 per cent against a basket of six leading currencies. More

LONDON (Reuters) -Britain’s Labour Party called on Monday for the energy price cap to be frozen to help people deal with another expected surge in fuel bills, putting pressure on the Conservative government as Britons grapple with the worst cost-of-living crisis in decades.Liz Truss and Rishi Sunak, the two Conservative Party politicians vying to replace Boris Johnson as prime minister, have so far promised more limited help than the 29-billion-pound plan outlined by main opposition leader Keir Starmer. Starmer said his Labour Party, if in power, would cap energy costs at the current level of 1,971 pounds ($2,386) per year for six months from October and would pay for it by extending a windfall tax on oil and gas companies in the North Sea to raise 8.1 billion pounds.Charities in Britain are warning that millions of people could be forced into poverty if the government does not soften the blow with a new support package.”We would make sure these energy price increases do not go ahead in the autumn and so instead of allowing the prices to go up and then trying to rebate people, we’re going to cut the problem at source and stop those price increases,” Starmer told the BBC.”We’re going to pay for it by extending the windfall tax on oil and gas companies in the North Sea who’ve made much bigger profits than they expected.”Labour also said it would backdate the windfall tax to January and remove the government’s investment allowances for energy companies, which would allow firms to get tax savings in exchange for more investment in oil and gas production.Starmer said the emergency package would also lower bills in the longer term by insulating 19 million homes in Britain over the next decade and would reduce inflation, which the Bank of England says will probably exceed 13% in October.But he ruled out temporarily nationalising energy companies which refuse to lower bills – a suggestion made by Labour’s former prime minister, Gordon Brown, who appeared to criticise Starmer for going on holiday last week at a time of crisis.Paul Johnson, director of the Institute for Fiscal Studies think tank, said the plan would probably need to run for a year at a cost of around 60 billion pounds. “If that’s what you want to achieve, that’s what you need to do but you do need to recognise that is a very expensive thing to do,” he told BBC radio.The government has said it is offering a 37-billion-pound package of help, with 8 million of the most vulnerable households receiving 1,200 pounds of direct support.A spokesman for Prime Minister Johnson said the finance ministry and other departments were making “necessary preparations to ensure a new government will have options to deliver support as quickly as possible, but clearly those decisions will rest with the new prime minister”. Russia’s move to cut gas exports to the West following its invasion of Ukraine has driven up bills across Europe, forcing governments in Italy, France and elsewhere to intervene. France has capped electricity tariff rises at 4%.The forecasting group Cornwall Insight estimates that average British annual bills for gas and electricity will jump to 3,582 pounds in October and 4,266 pounds in January. Earlier this year, the price cap was 1,277 pounds.Foreign minister Truss, the favourite to be Britain’s next prime minister, has faced criticism from political opponents and charities for appearing to rule out further “handouts” and, seeking to appeal to fiscally Conservative Party members, has not committed to increasing direct support to consumers.Sunak, the former finance minister, has said a cut in value-added tax (VAT) could save households around 200 pounds on their energy bills. ($1 = 0.8260 pounds) More

The 2023-2027 plan in the Eastern Economic Corridor (EEC) will include investments such as electric vehicles and medical technology, government spokesman Thanakorn Wangboonkongchana said in a statement.The government expects 400 billion baht to 500 billion baht ($11.27 billion to $14.08 billion) in investment per year, which will help the economy grow by 5% a year from 2024, he said.Under the current 2018-2022 plan, the investment in the EEC has reached 1.8 trillion baht, exceeding a target of 1.7 trillion baht, he said.The EEC, which covers three provinces east of the capital Bangkok, is a centerpiece of government efforts to boost growth and encourage investment, particularly in high-tech industries.Southeast Asia’s second-largest economy is expected to grow 2.7% to 3.2% this year, the state planning agency forecast on Monday.($1 = 35.50 baht) More

The grim set of figures indicate the world’s second largest economy is struggling to shake off the June quarter’s hit to growth from strict COVID restrictions, prompting some economists to downgrade their projections.Industrial output grew 3.8% in July from a year earlier, according to the National Bureau of Statistics (NBS), below the 3.9% expansion in June and a 4.6% increase expected by analysts in a Reuters poll.Retail sales, which only just returned to growth in June, rose 2.7% from a year ago, missing forecasts for 5.0% growth and the 3.1% growth seen in June.”The July data suggest that the post-lockdown recovery lost steam as the one-off boost from reopening fizzled out and mortgage boycotts triggered a renewed deterioration in the property sector,” said Julian Evans-Pritchard, senior China economist at Capital Economics.”The People’s Bank of China is already responding to these headwinds by stepping up support…But with credit growth proving less responsive to policy loosening than in the past, this probably won’t be sufficient to prevent further economic weakness.”Local shares gave up earlier gains after the data while the yuan weakened to a one-week low against the dollar and the Australian and New Zealand currencies pulled back from their recent two-month highs.China’s economy narrowly escaped a contraction in the June quarter, hobbled by the lockdown of the commercial hub of Shanghai, a deepening downturn in the property market and persistently soft consumer spending.Risks still abound as many Chinese cities, including manufacturing hubs and popular tourist spots, imposed lockdown measures in July after fresh outbreaks of the more transmissible Omicron variant of the coronavirus were found.The property sector, which has been further rocked by a mortgage boycott that weighed on buyer sentiment, deteriorated in July. Property investment tumbled 12.3% last month, the fastest rate this year, while the drop in new sales deepened to 28.9%. [L4N2ZO0MP]Nie Wen, Shanghai-based economist at Hwabao Trust, lowered his forecast for the third-quarter gross domestic product growth by 1 percentage point to 4-4.5%, after the weaker-than-expected data. ING also cut their forecast for China’s 2022 GDP growth to 4% from 4.4% previously, and warned a further downgrade is possible, depending on the strength in exports. BALANCING ACTTo prop up growth, the central bank on Monday unexpectedly lowered interest rates on key lending facilities for the second time this year. Analysts expect the cut is likely to lead to a corresponding reduction in benchmark lending rates next week. [B9N2YU01J]Many believe the room for the People’s Bank of China to ease policy further could be limited by worries about capital outflows, as the U.S. Federal Reserve, and other economies, aggressively raise interest rates to fight soaring inflation.”Very sluggish credit demand in July on the back of weak activity growth, further deterioration in property indicators and lower-than-expected CPI inflation might have contributed to the PBOC’s move,” said analysts at Goldman Sachs (NYSE:GS). “Going forward, whether PBOC would cut interest rates again could be data-dependent in our view.”Official figures on Friday showed new yuan loans tumbled by more than expected in July, as companies and consumers stayed wary of taking on debt.Chinese policymakers are trying balance the need to shore up a fragile recovery and eradicate new COVID-19 clusters. As a result, the economy is expected to miss its official growth target this year – set at around 5.5% – for the first time since 2015.In eastern Zhejiang province, the city of Yiwu, a key global supplier of small and cheap products, has been wrestling with COVID-related disruptions on and off since July. Many parts of Yiwu have been thrown into an extended lockdown since Aug. 11.”We’ve halted factory production since the city imposed a ‘quiet mode’,” said a sales manager at a Yiwu factory that makes consumer goods.Fixed asset investment, which Beijing hopes will compensate for slower exports in the second half, grew 5.7% in the first seven months of 2022 from the same period a year earlier, versus a forecast 6.2% rise and down from a 6.1% jump in January-June.The employment situation remained fragile. The nationwide survey-based jobless rate eased slightly to 5.4% in July from 5.5% in June, although youth unemployment stayed stubbornly high, reaching a record 19.9% in July.”In our view, China’s growth in H2 will be significantly hindered by its zero-COVID strategy, the deteriorating property sector, and a likely slowdown of export growth,” analysts at Nomura said.”Beijing’s policy support could be too little, too late and too inefficient.” More