2023-08-09 12:00:28
(Photo: The Canadian Press)
MARKET REVIEWS. Global markets started the day mostly higher on Wednesday, despite some investor concerns regarding the US banking system triggering a decline on Wall Street.
Stock market indices at 7 a.m.
At the start of the session, Paris gained 1.3%, Frankfurt added 1.1% and London collected 0.8%.
In New York, before the markets open, the average Dow Jones of industrial stocks took nearly 0.1% and the broader index S&P 500 added 0.2%.
The Japanese benchmark Nikkei 225 lost 0.5%, but the S&P/ASX 200 Australian rose slightly by 0.4%.
Seoul added 1.2%, Hong Kong increased by 0.3%, while Shanghai lost 0.5%.
On the New York Commodity Exchange, the price of oil rose 21 US cents to US$83.13 a barrel.
The context
European stock markets rebounded on Wednesday and Asian stock markets fell slightly, cautious following the publication of a drop in prices in China, a statistic that aggravates concerns regarding the health of the world’s second largest economy.
After the publication on Tuesday of a fall in Chinese imports and exports in July, investors cashed in on Wednesday the announcement of a drop in the consumer price index in China, the main gauge of inflation, to -0, 3% over one year in July.
The country thus enters deflation for the first time since 2021, bad news for the economy, because it means that consumers, instead of spending, postpone their purchases in the hope of more price cuts.
As for the producer price index, it contracted once more in July (-4.4%) for the tenth consecutive month.
“These figures will amplify concerns regarding China’s economic growth potential,” said Stephen Innes of SPI Asset Management.
The real estate crisis, a sector that has long accounted for a quarter of China’s GDP, is the “main” reason for this “deflationary shock”, estimates economist Andrew Batson, of the firm Gavekal Dragonomics.
Many economists now recommend a vast recovery plan to support activity, but the authorities are sticking for the moment to targeted measures and declarations of intent with regard to the private sector, without conclusive results.
For Stephen Innes, the Chinese economy, “which was once the biggest export machine in the world, might struggle to regain its former glory in the near future”. He further points out that “many of the old engines of growth are under pressure (manufacturing/exports and housing) or are simply not as needed as they once were (expensive infrastructure projects such as airports, metros and railways).
Lower prices in China might impact Western monetary policies, according to CMC Markets analyst Michael Hewson.
“How many more rate hikes can we expect in the coming months when there is a clear deflationary impulse coming from Asia, and where is the inflection point regarding the risk of excessive tightening” , he asks himself.
Thursday’s publication of the consumer price index for July in the United States will be a first indicator of what the markets can expect from the next central bank meetings.
SoftBank Group disappoints
SoftBank Group (-3.13% in Tokyo) announced Tuesday following the closing of the Tokyo Stock Exchange a surprise loss in its first quarter equivalent to three billion euros. There are, however, some encouraging signs, such as the boom in artificial intelligence and the planned mega-IPO of its subsidiary Arm, the world benchmark for microprocessor architectures.
According to the daily NikkeiApple and Samsung will take advantage of this next operation on Wall Street to invest in Arm, while the American giant Nvidia would also be in the running.
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