Last week was a challenging one for Chinese equities with the local market retreating sharply on growing concerns regarding the economic picture. The latest CPI data for the country revealed that prices fell by -0.3% during the 12 months to the end of July[1] marking a return to deflation for the first time since March 2021 during the grips of the COIVD-19 pandemic. The country’s slide into deflation, a phenomenon that typically weighs on consumer spending, coupled with further disappointing trade data last week added to growing expectations that policymakers will introduce additional aggressive stimulus measures, following more targeted recent efforts.
Elsewhere, US benchmarks were mixed with the S&P 500 closing the week -0.3% lower, reflecting the recent uptick in bond yields. Value stocks enjoyed outperformance versus their growth centric counterparts with the NASDAQ index which largely focuses on the latter camp, retreating by -1.9%. In Europe, the FTSE 100 fell by -0.5% despite better than expected economic growth data whilst the MSCI Europe ex UK index was broadly flat. Meanwhile the Nikkei 225 index in Japan recorded a +0.9% gain in what was a holiday shorted week for trading. Strong corporate earnings and the approval of inbound group holiday tours from China were both supportive[2].
In the commodity markets, copper was amongst the more notable movers with the metal shedding -3.1% over the course of the week. China concerns continued to dictate the direction of travel with the country the largest global importer of the metal. Oil recorded its 7th consecutive weekly gain, Brent Crude adding +0.7% to $86.83 a barrel. Last week saw the International Energy Agency (IEA) release a report highlighting record global demand during 2023 amid growing supply side constraints[3]. A bout US Dollar strength was a headwind for gold with the precious metal declining by -1.1% to $1,918 an ounce.
Week Ahead
| Day | Country | Measure | Period | Forecast | Previous |
| Monday | N/A | - | - | - | - |
| Tuesday | China | Industrial Production YoY | July | 4.40% | 4.40% |
| China | Retail Sales YoY | July | 4.50% | 3.10% | |
| China | Unemployment Rate | July | - | 5.20% | |
| Japan | GDP QoQ | Q2'23 | 0.80% | 0.70% | |
| UK | Unemployment Rate | June | 4.00% | 4.00% | |
| US | Retail Sales MoM | July | 0.40% | 0.20% | |
| Wednesday | Europe | GDP QoQ | Q2'23 | 0.30% | 0.30% |
| Europe | Industrial Production MoM | June | -0.10% | 0.20% | |
| UK | CPI Inflation YoY | July | 6.80% | 7.90% | |
| Thursday | N/A | - | - | - | - |
| Friday | Japan | Core CPI Inflation YoY | July | 3.10% | 3.30% |
| UK | Retail Sales MoM | July | -0.50% | 0.70% |
Source: Refinitiv Workspace, 14/08/23
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[1] National Bureau of Statistics of China – CPI July 2023. 14/08/23
[2] T. Rowe Price – Global Markets Weekly Update 11/08/2023. 14/08/23
[3] International Energy Agency – Oil Market Report August 2023. 14/08/23
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