Weak China economic data weighs on sentiment

Weak China economic data weighs on sentiment

Highlights

Weak economic data in China weighed on sentiment across the commodity complex. A stronger USD also reduced investor appetite.

Prices and commentary accurate as of 07:00 Sydney/05:00 Singapore/17:00(-1d) New York/22:00(-1d) London.

?

Ahead Today

  • Public holiday: Pakistan
  • Central bank speakers: Kugler (Fed).
  • Australian Clean Energy Summit, Sydney (thru 18 Jul)
  • Production reports: Rio Tinto, Vale
  • LME commitment of traders report
  • American Petroleum Institute’s weekly report on US oil inventories
  • Economic data: Canada housing starts, CPI; Germany ZEW survey expectations; Israel GDP; Italy CPI, trade; Japan tertiary industry index; Mexico international reserves; Saudi Arabia CPI; US retail sales, business inventories.
  • Listen to today's 5in5 with ANZ podcast for more on the global economy and markets

?

Market Commentary

Copper led the base metals lower on signs of further softness in demand. China’s economy grew by only 4.7% y/y in Q2 2024, the slowest pace in more than five quarters. This was also below expectations of 5.1%. In the monthly activity data, retail sales grew by 2.0% y/y in June, recording the lowest point since 2023. Automobile sales decreased 6.2% in June (-4.4% in May) and sales of household appliances and audio-visual equipment also turned negative, decreasing 7.6% in June. The drop in automobile and household appliances suggests the trade-in program has gradually lost its attraction. The one bright spot was industrial production, which remained solid at 5.3% y/y in June. This was driven by high-tech manufacturing, with EV production growing at 37%. Softness in aluminium prices was aided by stronger output in China. Total production climbed to a record high of 3.67mt in June on elevated refining margins. Aluminium stocks on the Shanghai Futures Exchange also rose, another sign of an oversupplied market.

Iron ore futures gained as the weak economic data in China raised hopes of further stimulus measures. The value of home sales decreased by 26.9% y/y in June, compared with a 30.5% decline over the first five months. The property investment sector remains weak, decreasing by 10.1% y/y ytd. This comes as the 20th Central Committee of the Communist Party of China convenes the Third Plenum. With the current property rescue plan having little impact on improving the confidence in the property market, there are growing expectations that officials will have to introduce policies that will help stimulate the economy in the second half of the year.

Gold traded near a record high on growing expectations of an imminent Fed rate cut. Chair Powell said that second quarter data has given policymakers greater confidence that inflation is heading down to the central bank’s 2% goal. The market is now pricing in two 25bp cuts in 2024. Spot gold initially shrugged off the assignation attempt on Trump, before moving higher as safe haven buying emerged. While political uncertainty has significantly risen following the attack, it still appears to be underpriced by the market.

The weak economic data in China also weighed on sentiment in the crude oil market. This comes after data last week showed softness in oil imports. Over the first six months of the year, the world’s top importer bought less crude oil compared with last year. June crude oil imports fell on both a monthly and annual basis to 46.45mt. There are also concerns that demand in the US peaked during the Fourth of July holiday. In broader markets, a stronger USD emerged as investors ratchet up bets that Trump will win back the White House. This dented investor appetite across the commodity complex.

Global gas prices edged lower on the broader risk-off tone across the energy complex, but supply disruptions remain in focus. Gas supply to the Freeport LNG export terminal is near zero, according to Bloomberg data. Production from the Cameron LNG facility in Louisiana also appears to be reducing.?

?

Chart of the Day

The rollover of China's credit impulse will be headwind for commodity markets

5in5 with ANZ Podcast

https://www.anz.com/institutional/five-in-five-podcast/?cid=em:in:pcst:idms2045

https://open.spotify.com/show/3cxHGsGxh9Nh6hNxwMI4jX?si=eb91cf006f1d4faf

Steven Ward

Assistant Vice President, Wealth Management Associate

4 个月

Thanks for sharing

回复

要查看或添加评论,请登录

社区洞察

其他会员也浏览了