Is China pulling the stimulus trigger?

Is China pulling the stimulus trigger?

Written by Jimmy MacGyver

(Reuters) – A look at the day ahead in Asian markets from financial markets columnist Jamie MacGyver.

Asian markets will get key economic signals this week that could determine monetary policy in the continent’s two largest economies – retail sales, industrial production and house prices from China, and Japan’s GDP and inflation.

Markets will also be watching interest rate decisions from New Zealand and the Philippines, inflation numbers from India and earnings reports from major companies from China, including Tencent, Lenovo CNOOC and

The biggest fireworks in the economic data calendar on Monday may come from India. Annual consumer price inflation is expected to show a sharp rebound in July to 6.40% from 4.8%, and a slowdown in wholesale price deflation to -2.4% from -4.1%.

The overall market mood is likely to be cautious after last week – the Nasdaq stock exchange posted its first consecutive weekly decline for the year, and the MSCI Asia excluding Japan stock index lost 2% on its way to a month. a little.

The caution could turn to outright gloom on Monday, after China’s largest privately held real estate developer Country Garden said it would suspend trading of its 11 domestic bonds.

The company’s shares hit a record low, it did not pay two dollar bond coupons due Aug. 6 totaling $22.5 million, it has about $200 billion in liabilities, and it warned last week that it could report a loss of up to $7.6 billion. first half.

Investors are wondering how long Beijing will resist pressure to inject any kind of stimulus into an economy now officially in recession with the weakest credit impulse since 2009.

Another batch of below par data this week may force the authorities to step in.

Meanwhile, investors and the Bank of Japan will pay close attention to Japanese inflation data later in the week. Economists polled by Reuters expect the annual rate of core consumer price inflation to slow to 3.1% in July from 3.3% in June.

A lower print could tempt the market to price in a more gradual change to the BoJ’s “yield curve control” policy, and firmer inflation could have the opposite effect.

Either way, the yen will come under scrutiny – it fell to a 15-year low against the euro in the late week and shrugs off levels against the dollar that last year prompted a major yen-buying intervention by Japanese authorities.

Asian stocks have performed poorly this year, largely due to concerns about China, which is battling weak growth, deflation and capital outflows. Chinese blue chips have been flat this year, and Hong Kong’s Hang Seng Index is down 4%.

The MSCI Asia stock index outside Japan is now down two weeks in a row for the first time since April, and has risen only twice in the past eight weeks.

Here are the key developments that could provide more direction to the markets on Monday:

India consumer price inflation (July)

India wholesale inflation (July)

Germany wholesale inflation (July)

(Writing by Jimmy McGiver; Editing by Diane Craft)

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