Tracking the Chinese slowdown

Tracking the Chinese slowdown

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(Reuters) – A look at the coming day in Asian markets from Jamie McGovern

Another day, another rise in US bond yields, and another sell-off in global markets. Moreover, Asian markets are waking up on Friday to a slew of key economic indicators that could confirm the extent of the Chinese slowdown.

August readings of home prices, urban investment, industrial production, retail sales and unemployment will paint a very clear picture of where the Chinese economy is at right now. And it’s not a pretty picture.

Any hopes of a recovery in the second half of the year have been dashed by renewed COVID-19 lockdowns and a slowdown in the real estate sector. Trade growth also slowed, while on Thursday it fell to a new two-year low through the 7.00/dollar barrier.

As part of an overall global rating downgrade, economists at Barclays (LON 🙂 lowered its forecast for China’s GDP growth for 2022 to 2.6% from 3.1% – its “lowest annual growth result in several decades” – and lowered its forecast for next year to 4.5% from 5.3%.

Some economists are even forecasting less than 2% growth this year.

After the offshore yuan fell below 7.00/$, markets will be on the alert for possible PBOC actions to prevent the fall from further increasing. The dollar has jumped 10% in the past five months, and 5% in the last two months – huge moves for the tightly-managed yuan.

But given the seemingly unstoppable rise in the US 2-year bond yield, it will be hard to tame the dollar, something the BoJ is also fully aware of as the yen slides back towards $145.00/$.

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South Korea’s unemployment data and Parliamentary testimony from RBA Governor Philip Lowe (NYSE:) could also give direction to their currencies on Friday.

Key developments that should provide further guidance to the markets on Friday:

Unemployment in South Korea (August)

Reserve Bank of Australia Governor Philip Lowe speaks

Sony (NYSE): Earnings (Q2)

Eurozone Inflation (August)

U MIch Inflation Outlook (September)

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