LGT Navigator

Cooling US inflation lifts stocks despite China slowdown

Cooling US inflation supported risk appetite, helping Wall Street finish higher on Tuesday despite renewed conflict in the Middle East. Asian equities also gained on Wednesday, led by a technology-driven surge in South Korea, even as disappointing Chinese GDP growth and a deepening investment downturn clouded the outlook. European markets had ended Tuesday broadly flat, while oil advanced following fresh US strikes against Iran and the restoration of a naval blockade near the Strait of Hormuz.

  • Date
  • Author Shane Strowmatt, Senior Investment Writer
  • Reading time 5 minutes

China Shanghai
© Shutterstock

China’s economy expanded by 4.3% year-on-year in the second quarter, down from 5% in the first quarter and below economists’ expectations, according to data released on Wednesday. This was the weakest growth since the fourth quarter of 2022 and fell short of Beijing’s full-year target range of 4.5% to 5%. Urban fixed-asset investment declined by 5.7% year-on-year in the first half, reflecting a prolonged property downturn, tighter local government borrowing constraints and a shortage of suitable projects. Retail sales nevertheless rose by 1% month-on-month in June after falling by 0.6% in May, while annual industrial output growth accelerated to 5.3% from 4.5%. Hong Kong’s Hang Seng Index gained 1.1% to 24,609.50 points on Wednesday, while mainland China’s CSI 300 rose 0.3% to 4810.42 points.

Asian stocks rise on softer US inflation

Most other Asian equity markets advanced on Wednesday. Korea’s Kospi surged 6%, supported by gains in SK Hynix and Samsung Electronics, while Japan’s Nikkei 225 rose 1.1%. Escalating tensions with Iran and elevated oil prices restrained sentiment, after US forces attacked Iranian military targets and reinstated a naval blockade of the country’s ports near the Strait of Hormuz. West Texas Intermediate (WTI) futures gained 0.7% to USD 79.87 per barrel, while Brent crude oil futures rose 0.9% to USD 85.52 per barrel.

Nasdaq rebounds as IBM shares plunge

The Nasdaq-100 rose 1.1% to 29,586.29 points on Tuesday, while the S&P 500 gained 0.4% to 7543.59 points and the Dow Jones Industrial Average was little changed at 52,508.27 points. Softer-than-expected US consumer inflation supported sentiment, although escalating hostilities with Iran and higher oil prices remained in focus. IBM shares collapsed by more than 25% after disappointing results and cautious management comments, weighing on other technology companies. Major banks generally reported stronger-than-anticipated earnings to start the second-quarter corporate reporting season, lifting shares of JPMorgan by 2.5% and Goldman Sachs by 9%.

US inflation eases in June

US consumer price inflation slowed to 3.5% year-on-year in June from 4.2% in May, while the consumer price index fell 0.4% month-on-month, according to Bureau of Labor Statistics data released on Tuesday. Core inflation was unchanged on the month and eased to 2.6% annually from 2.9% in May, with both headline and core readings cooler than the market had forecast. The decline was driven mainly by a 5.7% fall in energy costs, including drops of more than 9% for petrol and fuel oil, while services prices were flat as housing costs rose only slightly. Treasury yields fell immediately after the report and the US Dollar Index slumped, although markets still expects the Federal Reserve under Chair Kevin Warsh to raise interest rates in September as renewed Middle East tensions threatened to push oil prices higher again.

Swiss producer and import prices fall

Switzerland’s Producer and Import Price Index declined by 0.3% month-on-month to 99.8 points in June and was 2.1% lower year-on-year, according to data released on Tuesday. Producer prices slipped by 0.1% from May and 2.7% from a year earlier, while import prices fell by 0.7% month-on-month and 0.8% year-on-year. Lower prices for petroleum products, oil and natural gas drove the monthly decline, while pharmaceuticals and food imports also became cheaper. The Swiss Market Index fell 0.2% to 14,241.77 points on Tuesday, while the Euro Stoxx 50 edged up 0.1% to 6278.75 points.

Corporate and economic calendar

Corporate news in focus: Quarterly figures from ASML, BlackRock, Elevance Health, Johnson & Johnson, Morgan Stanley, Progressive, and Richemont.

Economic data in focus: US Producer Price Index and Fed New York Empire State Manufacturing Index (14:30), Bank of Canada interest rate decision (15:45), US Federal Reserve Beige Book (20:00).

LGT helps you make informed investment decisions

Global economic and market trends at a glance

You can also follow us on Facebook or LinkedIn – or visit Insights and discover interesting background articles. If you have questions, a consultant from the bank will be happy to help you.

Imprint
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.