Stocks subdued on weak Chinese economic data

LONDON (AFP): European and US stocks edged higher Wednesday as investors weighed data showing weakness in China’s economy and hopes that the US Federal Reserve would skip an interest rate hike this month.

The Organisation for Economic Co-operation and Development slightly raised its growth outlook for the world economy to 2.7 percent as inflation eases and after China dropped Covid restrictions, but it warned the recovery faced a “long road”.

A World Bank warning on the global economic outlook released Tuesday gave some food for thought as it lowered its growth expectations for next year.

Reports that US Secretary of State Antony Blinken would visit China provided optimism for a thawing of relations between the superpowers.

In foreign exchange, the Turkish lira sank to an all-time low against the dollar, with the currency continuing to struggle after the re-election of President Recep Tayyip Erdogan at the end of May.

The greenback, which hit a peak at 23.17 lira, was down against the euro, pound and yen.

Traders are keeping tabs on China, with reports saying authorities have asked the country’s biggest banks to lower their deposit rates to boost the economy as it struggles to recover from years of zero-Covid lockdowns.

Analysts said such a move could indicate China’s central bank was considering an interest rate cut as soon as this month.

The need for fresh help was highlighted Wednesday by data showing Chinese exports tumbled more than seven percent in May, far more than expected and the first drop since February.

The reading was “yet another disappointing data which will raise growth concerns and intensify expectations of more policy support”, said Khoon Goh, at Australia and New Zealand Banking Group.

The trade figures follow data showing shrinking factory activity and showed the uphill task officials have in kickstarting the economy.

Along with weak Chinese data, markets reacted also to news of subdued industrial production in Europe’s biggest economy, Germany.

US trade data for April also caused concerns about the global economic outlook as exports fell by 3.6 percent from March, a drop of $9.2 billion.

Next week’s Fed policy decision was also in focus, with investors hoping officials will decide not to lift borrowing costs for an 11th meeting in a row, in light of data indicating more than a year of tightening is beginning to kick in.

A mixed jobs report last week, which showed a pick up in hiring but slower wage growth, suggested the US economy remained healthy and gave the central bank room to skip a hike this month, even as inflation remains sticky.

Elsewhere, oil prices gained in more volatile trading for the commodity as traders weigh Saudi output cuts against potential slowing demand as the global economy continues to battle elevated inflation.