Markets Calm Following Chinese and German Data
01 August 2022
It looks like Monday will not bring elevated volatility as equity indices traded slightly lower during the London session while US bonds also slipped, pushing bond yields higher.
Chinese data mixed
According to government figures released on Sunday, China's service industry continued to grow during July, albeit more slowly. However, this was still able to counteract an unanticipated decline in industrial activity.
China's non-manufacturing purchasing managers index decreased from 54.7 in June to 53.8 in July. An expansion is indicated by reading above 50.
On the other hand, July saw a decline in China's leading manufacturing sector, partly due to problems in the real estate market. The Caixin PMI indicator fell from 51.7 to 50.4. Sales and prices for new homes decreased during the month.
The US dollar continued to slide today as investors are pricing in a stop to the rate hikes and a possible rate cut in Q1 2023 as the US economy has entered a recession. On the other hand, there seems to be no good reason to buy the Euro right now. Thus, the EURUSD pair might remain muted.
German economy falters
More bad news came from Germany, not surprisingly, when retail sales plunged to -1.6% monthly in June, down from 0.6% in May. Moreover, the yearly gauge cratered further, printing -8.8%. Both numbers failed to meet analysts' estimates. Since Destatis kept statistics on German retail sales nationwide in 1994, the yearly decline was the biggest.
According to some estimates, the German economic growth could decline by 15% in the second half of 2022. Nevertheless, the market does not seem to care, pushing the German DAX index to six-week highs.
In commodities, silver was hit with some profit-taking after last week's massive rally, but so far, it has remained above 20 USD. Gold was flat, changing hands near 1,765 USD, while oil fell toward its 200-day moving average again.