Last week was an excellent test for the overall bull market. While data out of China pointed to decelerating growth, US equities held up surprisingly well. High oil continues to be a challenge, but except for a few key sectors like Airlines, the broad economy still seems to be humming along.
Small and mid-sized firms in China have been hit harder by the weakening economy compared to large corporations. According to Shankar Sharma, India has successfully managed to retain its balance and to stimulate economy growth. Goldman Sachs downgraded its rating on Indian stocks to “underweight”. Following a six-day consecutive declines the BSE benchmark Sensex managed to erase all losses by gaining 179 points.
The holiday week saw the dollar consolidate against most of the major currencies. The yen was the main exception as its losses were extended under the aggressive signals coming from the new Japanese government.
The much-denied hard landing in China is now underway with weakening data everywhere one looks. Today there is More Bad News For China as FDI Falls.
Foreign direct investment in China fell to the lowest level in two years in July, fueling concern that waning confidence in the nation’s growth prospects may restrain any economic rebound.
BEIJING — China’s leaders face new pressure to stimulate a slowing economy after growth fell to its lowest since 1991, hurt by weak trade and efforts to cool a credit boom.
The world’s second-largest economy expanded 7.5% over a year earlier in the three months ending in June, down from the previous quarter’s 7.7%, data showed Monday. Growth in factory production, investment and other indicators weakened.
China’s crude imports fell in the first half of 2013 compared with a year ago, raising the prospect that slowing growth in the world’s second-largest economy may lead to lower-than-expected global fuel consumption this year.
With oil imports dropping and China warning of a “grim” trade outlook on Wednesday, the world’s second-biggest oil consumer may not be the buoyant force it has been for oil markets in the past decade.
Recent economic reports from China are, at the least, mixed. The responses to Friday’s GDP report are illustrative.
From IHS-Global Insight (Xianfeng Ren):
China has reported the worst quarterly GDP growth, 7.6%, in almost three years. This is a less vicious downslide compared with the Global Financial Crisis if measured by peak-to-trough deceleration, but nearly as bad as in the Asian Financial Crisis.
NEW HAVEN – The punditocracy has once again succumbed to the “China Crash” syndrome – a malady that seems to afflict economic and political commentators every few years. Never mind the recurring false alarms over the past couple of decades. This time is different, argues the chorus of China skeptics.
By Labutes IR:China's economic growth has been amazing over the last few years, higher than 8% annually for the last seven years. However, the most recent economic data out of China has surprised on the low side and has increased the odds of an economic hard landing.