Both consumer and producer prices were dropping in China in a yet another sign that the world’s second largest economy was struggling to achieve a successful economic reopening this year. Chinese stocks were in the red on Thursday while other Asian markets made gains. The S&P 500 and Nasdaq continued their winning streaks on Wednesday.
China’s Consumer Price Index (CPI) fell 0.2% in October when compared with a year earlier. The falling prices show that stimulus measures by the Chinese government haven’t been successful at propping up consumer demand. Beijing has introduced a series of measures to stimulate the economy after the country’s economic reopening proved to be much softer this year than initially expected. In addition to consumer prices, which contracted this month, producer prices have also been in a free fall for 13 consecutive months. The Producer Price Index dropped 2.6% on the year in October. Hong Kong's Hang Seng Index was down 0.4%, while the Shanghai Composite was trading 0.1% lower on Thursday.
Beyond China, stock markets in the Asia-Pacific region were trading in positive territory on Thursday. In Tokyo, the Nikkei 225 shot up 1.6%. In South Korea, the Kospi closed up 0.2% following wild swings earlier in the week. In the previous two sessions it had fallen more than 3%, erasing more than half the gains it made Monday after the government announced a ban on short-selling. Australia’s S&P/ASX 200 closed up 0.3%.
In New York, stock indices barely moved midweek after a speech by Federal Reserve Chairman Jerome Powell on Wednesday failed to deliver any details about monetary policy. Powell is speaking again on Thursday in a panel on monetary policy and traders will look for any clues about whether the recent stock rally, which was driven by hopes of peak rates, should be maintained. While the Dow Jones Industrial closed down 0.1%, ending a multi-day winning streak, the S&P 500 continued to rise, up 0.1% along with the Nasdaq-100, which gained 0.1% as well. The S&P 500 has closed in positive territory 9 days in a row and the Nasdaq-100 has made gains 8 consecutive days.
In Europe, the Euro Stoxx 50 gained 0.6% Wednesday. In company news, UBS began selling additional tier-1 (AT1) bonds again on Wednesday, just months of taking over its rival, Credit Suisse. Part of that deal involved cancelling USD 17 billion of AT1 bonds issued by Credit Suisse, a controversial move opposed by bondholders. AT1 bonds are a form of junior debt that can be written off or converted into other securities (such as equity) when certain conditions are met (such as a bank’s capital ratio falling below a certain level).
Elsewhere in Europe, Germany’s annual inflation was confirmed to be 3.8% in October, the lowest rate in more than two years. The pace of price increases is also much slower than the 4.5% in September.
Corporate news in focus: Earnings figures from Logitech, Zurich Insurance Group, Merck KGaA, Deutsche Telekom, Hannover Rück, Henkel, Hapag-Lloyd, Astra Zeneca, Honda, Nissan.
Economic data in focus: US weekly initial jobless claims (14:30 CET), European Central Bank President Christine Lagarde speaks at the inauguration of the House of the Euro in Brussels (18:30), Federal Reserve Chair Jerome Powell takes part in a policy panel discussion at the Jacques Polak Annual Research Conference in Washington, D.C. (20:00).
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.