Not wanting to be left out from the stimulus talk surrounding the ECB, the Fed Reserve and the Bank of Japan, it was the turn of China to be the centre of possible monetary policies as soft Chinese inflation figures continued to spur the risk on sentiment and rise in global stocks
The world’s second largest economy – the Chinese – released figures which showed that China’s inflation fell to a 30 month low in July, providing policymakers in Beijing a bigger buffer to boost stimulus measures to prompt economic growth. China has been looking to spur domestic consumption amidst a slowing global demand for its exports in key export markets such as the EU and the US.
Consumer prices increased 1.8% in July from the previous year. This was down from a 2.2% growth rate in June and a 3% increase in May. Key drivers of the slowdown in the rate of inflation were the drop in prices of pork and meat and poultry products, which fell by 18.7% and 6.1% from a year earlier.
China’s economy expanded at an annual rate of 7.6% in the months April to June, down from an 8.1% growth rate in the previous three months.
There are fears that growth in the Chinese economy may slow further in the coming months which may see policymakers introduce further measures to boost growth. China’s central bank, the People’s Bank of China, has slashed its key interest rates two times since the beginning of June, taking the benchmark lending rate down to 6%.
The numbers sparked talk Beijing can loosen monetary policy, which combined with Australian employment exceeding estimates in July and ECB/Fed stimulus talk was bullish for Asian stocks and bearish for the dollar.
The Hang Seng index was up 0.75%, the Nikkei 225 was up 0.80% and the S & P/ASX was up 0.11% whilst the USD was down against most major currencies with the US Dollar index which tracks the greenback against a basket of 6 weighted currencies was down 0.11%.
Early risers will keep a keen eye on the BoJ press conference for movement in the Yen and to see if the Japanese are looking towards stimulus measures to boost exports. British and Italian trade balances are announced mid morning – around 9.30am GMT and then the focus switches to the US where jobless and trade balance figures are released – all of which promises to be a busy day of trading creating plenty of market volatility.