Saikat Chatterjee gives a look at how the markets will do the next day.
Friday’s news about China’s economic growth is a stark reminder of how hard it is for world leaders to make decisions.
Official data showed that the gross domestic product fell by 2.6% in the second quarter compared to the first quarter. This was more than the expected drop of 1.5%. So, the government’s prediction that the economy will grow by 5.5% this year looks a little high now.
COVID- The 19 lockdowns in the world’s second-largest economy are a big reason, but it’s also clear that confidence is still low and that restrictions are still in place in large parts of the country.
The world economy will suffer if China’s growth slows down, but policymakers are not about to give up. Just this week, rates went up sharply in Canada, New Zealand, and South Korea, and Singapore and the Philippines surprised everyone by going up.
Closer to home, Europe is facing new problems after the Italian government got into trouble and the European Union cut its growth predictions for this year and next.
Even though two U.S. Federal Reserve officials shot down talk of an interest rate hike of 100 basis points (bps) later in July, U.S. interest rates are still going to more than double in less than a year.
It’s no wonder investors are getting ready for more bad news.
The euro fell below parity against the dollar again, and it has fallen 1.5 percent against the dollar so far this week. The yen is speeding toward 140 per dollar.
And the inversion of the U.S. Treasury yield curve, which is a sign of an economic downturn, is getting worse. Futures for U.S. and European stocks aren’t going anywhere.
Key events that should give the markets more direction on Friday:
Eurozone May trade balance, University of Michigan consumer sentiment survey, and June retail sales in the United States
Speaker’s Corner: Rehn from the ECB, Bostic, Bullard, and Daly from the Fed
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(This story is being resubmitted to add a word that was left out of the fourth paragraph.)