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US, Chinese macroeconomic data weigh on sentiment

US and Chinese macroeconomic data weighed on market sentiment midweek, with softer US retail sales and weaker-than-expected Chinese inflation fuelling concerns about global growth. While most major indices in the Asia-Pacific region were advancing on Wednesday, mainland China’s CSI 300 was under pressure, following US stock indices, which had closed weaker on Tuesday. European stocks barely moved on Tuesday with little macroeconomic data to shift sentiment. Markets now turn their attention to key US labour market data due on Wednesday.

  • Date
  • Auteur Shane Strowmatt, Senior Investment Writer
  • Temps de lecture 5 minutes

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US retail sales were unchanged in December, following a 0.6% increase in November, according to Commerce Department data released on Tuesday, signalling a softer pace of consumer spending and overall economic growth heading into the new year. Economists had expected a solid rise, but weaker demand and a softening labour market have weighed on sentiment, and higher prices linked to tariffs continued to bite. Core retail sales, which exclude automobiles, gasoline, building materials and food services and are closely aligned with the consumer spending component of gross domestic product (GDP), slipped 0.1% in December after a downwardly revised 0.2% gain in November, which may lead economists to scale back fourth-quarter consumption and GDP estimates. Consumer spending had previously supported robust 4.4% annualised GDP growth in the third quarter, and the Atlanta Federal Reserve is projecting around 4.2% growth for the fourth quarter, with the government’s delayed advance estimate due next week.

US stocks slip on Fed comments

In addition to the weak retail sales data, US equity indices were subdued by comments from Federal Reserve officials that dampened expectations for further interest-rate cuts. The Dow Jones Industrial, which had touched an intraday record near 50,513 points earlier in the session, closed up 0.1% at 50,188.14 points, while the broader S&P 500 fell 0.3% and the technology-heavy Nasdaq 100 lost 0.6%. Cleveland Fed President Beth Hammack signalled that policy rates could remain unchanged for an extended period as policymakers assess the impact of recent cuts and monitor economic momentum, with markets now looking to the US labour market report on Wednesday and consumer price data on Friday for further guidance.

China inflation remains subdued

China’s consumer price index increased 0.2% year-on-year in January, slowing from 0.8% in December and undershooting market expectations, while prices also rose 0.2% on the month versus a forecast of 0.3%. Core CPI eased to 0.8% from 1.2% in December, highlighting weak underlying demand. Producer prices fell 1.4% compared with a year earlier, less than the 1.9% drop in December, although factory-gate deflation has dragged on for more than three years, pressuring manufacturers amid subdued consumer confidence and fallout from US trade measures. The persistent deflationary backdrop, combined with a prolonged property downturn and rising public debt levels, has prompted the People’s Bank of China to reaffirm on Tuesday its commitment to "appropriately loose” monetary policy ahead of key policy meetings next month, as Beijing seeks to balance investment-led growth with targeted, debt-conscious support for consumption.

Asia stocks mostly higher despite poor macro data

Asia-Pacific equity markets traded mostly higher on Wednesday as investors looked past the weak US and Chinese macroeconomic data and awaited key US labour market figures later in the day. Hong Kong’s Hang Seng Index was 0.3% higher, while mainland China’s CSI 300 bucked the regional trend, trading down 0.2%. Japan’s Nikkei 225 was trading 2.3% higher, while Korea’s Kospi was up 1%. Australia’s S&P/ASX 200 was outperforming with a gain of 1.7%, while India’s Nifty 50 edged up 0.1%.

European stocks little changed

European stock markets were broadly flat on Tuesday with a lack of macroeconomic data releases to move major indices. The Euro Stoxx 50 slipped 0.2%, while Germany’s DAX eased 0.1% and France’s CAC 40 was marginally higher, adding 0.1%. The Swiss Market Index was essentially unchanged, dipping 0.1%, as investors remained cautious ahead of key US economic data later in the week.

Corporate and economic calendar

Corporate news in focus: Quarterly figures from Cisco, Commerzbank, Kraft Heinz, McDonald's, T-Mobile US, and Total Energies.

Economic data in focus: US unemployment rate and nonfarm payrolls (14:30) and Canadian building permits (14:30).

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Editor: Alessandro Fezzi
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