HONG KONG: Asian markets recovered after an early stumble on Monday as data showed China’s economy growing at its weakest pace in nearly three decades, hit by the US trade war, while investors debated the depth of an expected Fed rate cut.
The world’s number-two economy expanded 6.2 percent in April-June, the worst reading since the early 1990s but in line with forecasts and within the government’s target range, reports AFP.The reading highlights the negative impact the US tariffs stand-off is having on China as leaders also try to recalibrate its growth model from exports and state investment to one driven by consumer spending.
“While GDP touched a 27-year low in Q2, the on-consensus print does lessen market fears that China’s economy is headed for a hard landing,” said Stephen Innes at Vanguard Markets.
Observers also pointed out that the weakness raised the chances of further monetary easing measures from the central People’s Bank of China, while investors were also tracking the progress of trade talks between Washington and Beijing.
“While the PBoC has already delivered stimulus this year, markets are awaiting a bazooka of (bank reserve ratio) cuts and additional measures, which will probably come if trade talks collapse,” said OANDA senior market analyst Edward Moya.
“If talks steadily progress, we will still probably see the PBoC deliver fresh stimulus following the Fed’s highly anticipated rate cut at the end of the month.”
Hong Kong added 0.3 percent, Shanghai rose 0.4 percent, and Taipei was also up.Sydney dropped 0.7 percent and Wellington shed 0.3 percent. Singapore and Seoul were also down.
Tokyo was closed for a holiday.
The initial drops came despite a record-breaking close for all three main indexes in New York on Friday.
There are bets the US Federal Reserve will cut borrowing costs at the end of the month, though there is speculation about how far it will go.
While bank boss Jerome Powell’s congressional testimony last week flagged a reduction, data indicating inflation remains reasonably healthy has kept investors guessing.