Global shares slip on weak China growth, dollar suffers weekly mauling

LONDON, Oct 18 — World stocks slipped after China posted its weakest growth rate in nearly three decades today, while the dollar was set for its worst week in almost four months having been pummelled by pound and euro Brexit rallies. China’s…

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HONG KONG, Oct 18 — Sterling fell today as investors fret over Boris Johnson’s chances of pushing his Brexit deal through parliament, while Asian markets were mostly down after data showed China’s economy expanded at its slowest pace in nearly…

Oil ebbs as China’s slowest GDP growth in almost 3 decades stokes demand fears

SEOUL: Oil prices slid on Friday on jitters over demand from China after the world’s largest oil importer recorded its weakest quarter of economic growth in nearly three decades, dragged down by a trade dispute with the United States.

Global benchmark Brent crude oil futures fell by 21 cents, 0.4%, to $59.70 a barrel by 0646 GMT.

U.S. West Texas Intermediate (WTI) crude futures edged down by 4 cents, or 0.1%, to $53.89 per barrel.

In the third quarter, China’s gross domestic product (GDP) growth slowed to 6% year-on-year, its weakest pace in 27-1/2 years and below expectations, dogged by soft factory production amid ongoing trade tensions with United States and sluggish domestic demand.

“The (China) GDP print has weighed on short-term sentiment and we have seen regional stock markets and oil contracts edge lower because of that,“ said Jeffrey Halley, senior market analyst for Asia Pacific at brokerage OANDA.

Crude demand growth tends to track economic growth trends, but Halley said China’s need for oil would not recede any time soon.

Underlining that view, Chinese official data released on Friday showed robust refinery throughput in September, rising 9.4% from a year earlier to 56.49 million tonnes, on increases from new refineries and some independent refiners resuming operations after maintenance.

“There’s a lot of demand pessimism already priced into the oil markets … China GDP (growth) was not negative enough (below 6%) to alter the positive effects for the trade talks,“ said Stephen Innes, Asia Pacific market strategist at AxiCorp.

U.S. and Chinese trade negotiators are working on nailing down a Phase 1 trade deal text for their presidents to sign next month, U.S. Treasury Secretary Steven Mnuchin said on Wednesday.

Adding to the downward pressure, U.S. crude oil stockpiles surged last week by 9.3 million barrels as refinery output dropped to a two-year low, while gasoline and distillate fuel inventories decreased, the Energy Information Administration said on Thursday.

Elsewhere, the joint technical committee monitoring a global deal to cut output between the Organization of the Petroleum Exporting Countries (OPEC) and partners, including Russia, found compliance with cuts for September stood at 236%, according to four OPEC sources.

“Concerns about softer growth in the demand for oil and doubts about OPEC’s ability to rebalance the market on the current production cut rate will be key drags on prices in the near term,“ ANZ Research said in a note.

OPEC and its allies have agreed to limit their oil production by 1.2 million barrels per day (bpd) until March 2020.

OPEC lowered its 2019 global oil demand growth forecast to 0.98 million bpd, while leaving its 2020 demand growth estimate unchanged at 1.08 million bpd, according to OPEC’s latest monthly report. -Reuters

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Australia, NZ dollars rally on rate view and China relief

SYDNEY: The Australian dollar touched a four-week high on Friday as the market scaled back bets on a near-term cut in local interest rates, while Chinese data showed some resilience in September activity even as third-quarter growth slowed.

The Aussie dollar was firm at $0.6835 after jumping jumped almost 1% on Thursday alone as a break of major resistance at $0.6810 sparked a wave of short-covering.

The New Zealand dollar followed to its highest in five weeks at $0.6376, climbing 0.9% overnight.

The rally began when Australian jobs data showed an unexpected dip in unemployment in September, which dimmed speculation the Reserve Bank of Australia (RBA) would cut interest rates again soon.

It got a further lift when RBA Governor Philip Lowe told a conference in Washington that lower rates were working to improve the economy and a move to negative rates was “extraordinarily unlikely”.

The futures market responded by paring back the probability of a November rate cut to just 14%, compared with 34% a week ago. The chance of an easing in December dropped to 52%, after rising above 80% last week.

The central bank has already cut rates three times this year to a record low of 0.75% and is fast running out of room to ease more.

“The September labour report is likely to be good enough for the RBA to hold back and not follow through with another interest rate cut in November,” said Peter Dragicevich, a market strategist at Suncorp.

“But given the still sluggish domestic growth backdrop, external risks, trend of lower global interest rates and excess capacity that remains in the labour market, it still looks like a matter of when, not if, the RBA provides more support.”

As a result, the market is almost fully priced for an easing to 0.5% by March next year.

For now, the diminished chance of near-term easing weighed on bond futures. The three-year bond contract eased another 1.5 ticks to 99.250, the lowest in more than a month and some way from the recent all-time top of 99.460.

The 10-year contract slipped 1 tick to 98.8850, away from its recent peak of 99.1550.

The Aussie was unfazed by a mixed bag of Chinese data that showed economic growth slowed to 6.0% in the third quarter, just missing forecasts of 6.1%.

Yet industrial output beat estimates with an increase of 5.8% in September, while retail sales growth picked up to an annual pace of 7.8%, offering hints that stimulus was supporting activity to some extent.

“The numbers could have been worse. If anything there was some fear it might drop below 6% but that didn’t happen,” said Mitul Kotecha, senior emerging markets strategist at TD Securities in Singapore.

“The industrial production numbers highlight that there is a bit of a glimmer of hope on the manufacturing side and some hope that trade progress will help further,” Kotecha added. – Reuters

China’s Q3 GDP growth slows to 6%, slowest in 27 years

BEIJING: China’s economy expanded at its slowest rate in nearly three decades in the third quarter, hit by cooling domestic demand and a protracted US trade war, official data showed Friday.

The Chinese economy grew 6.0 percent in July-September, compared with 6.2 percent in the second quarter, according to the National Bureau of Statistics (NBS).

The reading — in line with an AFP survey of 13 analysts — is the worst quarterly figure since 1992 but within the government’s target range of 6.0-6.5 percent for the whole year. The economy grew at 6.6 percent in 2018.

“The national economy maintained overall stability in the first three quarters,” said NBS spokesman Mao Shengyong.

“However, we must be aware that given the complicated and severe economic conditions both at home and abroad, the slowing global economic growth, and increasing external instabilities and uncertainties, the economy is under mounting downward pressure.”

Services and high-tech manufacturing were the key areas of growth, while employment was “generally stable”, he added.

Propping up economy

Beijing has stepped up support for the economy with major tax and rate cuts and has scrapped foreign investment restrictions in its stock market.

In its latest measure to shore up growth, the central bank said Wednesday it was pumping 200 billion yuan ($28 billion) into the financial system through its medium-term lending facility to banks, which is designed to maintain liquidity in the market.

But the efforts have not been enough to offset the blow from softening demand at home.

The trade conflict and weak domestic demand prompted the International Monetary Fund to lower its 2019 growth forecast for China from 6.2 percent to 6.1 percent on Tuesday.

The long-running trade war with the US has also chipped away at the Chinese economy.

This week, China reported weaker-than-expected import and export figures for September after Washington imposed new tariffs that month, triggering a tit-for-tat response from Beijing.

There were mixed signals for the economy in September.

Industrial output rose 5.8 percent, from 4.4 percent in August, led by a surge in demand for solar panels and electric vehicles, according to the NBS.

But fixed-asset investment slid to 5.4 percent on-year in January-September, from 5.5 percent in January-August, as the government warned against risky borrowing to build roads and bridges that could artificially pump up GDP in the short run.

China’s army of consumers were slowly starting to open their wallets again, with retail sales edging up 7.8 percent on-year in September, compared with 7.5 percent in August.

Let’s make a deal

A “phase one” deal announced by US President Donald Trump last Friday after he met China’s top negotiator Liu He in Washington offers a temporary reprieve from further tariff hikes.

But it did not roll back any of the stinging tariffs already imposed on hundreds of billions of dollars in trade between the economic powers, nor did it address another round of import taxes planned for December.

“A limited agreement will not resolve the underlying areas of disagreement between the two sides as long-term divergence in US and China national interest remains across trade, technology, investment and geopolitics,” said Michael Taylor, a managing director for Moody’s Investors Service.

“We expect further rounds of negotiation to remain challenging, with further potential for financial markets volatility.”

China’s commerce ministry spokesman Gao Feng said Thursday that its negotiators have “accelerated efforts” to hammer out the details of this mini-deal, and the two sides were aiming for an “early agreement”.

Trump had said Wednesday that he hopes to sign the deal with his Chinese counterpart President Xi Jinping at the APEC summit in Chile next month.

But Gao declined to offer details on whether the text of the partial deal, or a full agreement, would be ready before the mid-November deadline. – AFP

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