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What’s happening: Asian stocks closed mostly lower on Thursday, with all but Chinese stocks recording gains.
What happened: Markets remained cautious on Thursday, amid concerns over China’s sluggish economic recovery.
Investor risk appetite was also hit by rising speculations of the US Federal Reserve hiking rates again this year.
Why it matters: MSCI’s broadest index of APAC stocks, excluding Japan, tanked to 495.03 on Thursday, hitting its lowest level since November 29 last year. The index recovered some losses before closing lower by 0.49% at 500.43. The index has lost around 8% so far in August and is on track for its highest worst losses since September 2022.
A series of disappointing economic data from China led investors to short Asian stocks. Earlier this week, China reported 3.7% year-on-year growth in industrial production for July, representing a slowdown from June’s 4.4% and below market forecasts.
China’s retail sales grew by 2.5% year-on-year in July, also slowing from the 3.1% rise reported in the previous month. The figure was significantly short of market estimates of 4.5% growth, although it did mark the seventh consecutive month of growth in retail sales.
China also reported an increase in its urban unemployment rate to 5.3% in July, from June’s 16-month low of 5.2%.
Meanwhile, strong data from the US and seemingly hawkish commentary of Federal Reserve officials sparked speculations of the central bank hiking interest rates again in either November or December.
The Asia Dow index declined by 0.26% to close at 3,380.19 on Thursday. Japan’s Nikkei 225 shed 0.44% to settle at 31,626.00, while Hong Kong’s Hang Seng shed 0.01% to reach 18,326.63. India’s Sensex declined by 0.59% to close at 65,151.02 and Singapore’s FTSE Straits Times Index was down 0.52% at 3,196.75.
Although China’s sluggish economic recovery exerted downward pressure on Asian stock markets, the only major index of the region that did record a gain was the Shanghai Composite Index. Investors bought Chinese stocks after their steep decline through the week. Hopes of Beijing announcing more impactful stimulus measures to trigger growth, following the disappointing economic data releases, also supported investor sentiment for Chinese stocks. China’s Shanghai Composite Index rose 0.43% to close at 3,163.74 on Thursday.
What to watch: Traders will monitor China’s economic recovery. Markets will also watch US inflation data, which could influence the Federal Reserve’s rate hike decision in the final months of the year.
Context: The GBP/USD forex pair recorded gains on Thursday, after a pullback during the overnight trading session.
Details: Although the GBP/USD has maintained a broad upward trajectory for most of this year, indecisiveness in the markets has restricted a more definitive rally in the forex pair.
The latest data on consumer price inflation stroked speculations of the Bank of England raising its benchmark interest rate. The CPI data showed prices rising by 6.8% in July, in-line with market estimates. While this eased from the 7.9% rise reported in the previous month, the core inflation rate in the UK remained sticky.
The GBP/USD forex pair was also supported by weakness in the US dollar. The US dollar index, which measures the greenback’s performance versus a basket of major peers, shed 0.25% to reach 103.31 on Thursday.
The GBP/USD rose by 0.02% to 1.2749 on Thursday. The forex pair has added almost 7% so far this year.
What to watch: Traders await the release of retail sales data by the UK today. Retail sales had grown by 0.7% in June 2023, surpassing market expectations of 0.2%. Economists project UK’s retail sales to decline by 0.5% in July, after three straight months of growth.
Markets will also watch comments from BoE and Fed officials to get insights into whether policymakers are leaning towards further interest rate hikes.
Other Markets: European indices closed lower on Thursday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index down by 0.63%, 0.71%, 0.94% and 0.90%, respectively.
Ukrainian forces continued to make territorial gains and landed on the left bank of the Dnipro river. The news sent the safe-haven US dollar index lower this morning.
Purchases of Canadian securities by foreign investors rose by C$12.56 billion in June, following a net acquisition of C$10.21 billion in the prior month, lending support to the CAD/USD forex pair.
US initial jobless claims fell to 239,000 in the week ending August 12, from the seven-week high of 250,000 in the prior week. Despite this, US stocks ended the day in the red on Thursday, with the Dow Jones index, S&P 500 and Nasdaq down by 0.84%, 0.77% and 1.17%, respectively.
Japan’s annual inflation rate remained unchanged at 3.3% in July. However, this being significantly higher than market estimates of 2.5% sent the JPY/USD pair lower in forex trading this morning.
Malaysia’s GDP growth decelerated to 2.9% year-over-year in the second quarter, from 5.6% growth in the previous quarter. The figure was also short of expectations of a 3.3% expansion, which exerted pressure on the MYR/USD forex pair.
Austria’s consumer price index and harmonised inflation rate, Greece’s current account balance, Taiwan’s GDP growth rate, Cyprus’ harmonised inflation rate, Eurozone’s inflation rate, construction output and keynote speech by ECB member Philip Lane, Macau’s tourist arrivals and inflation rate, Mauritius’s balance of trade, Portugal’s producer price index, India’s foreign exchange reserves, Mexico’s retail sales, Canada’s raw materials prices and producer price index, Chile’s current account balance and GDP growth rate, as well as US Baker Hughes Oil Rig Count.
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