Sunday, 25 September, 2022
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Oil prices tumble as China economy stutters

Oil prices tumble as China economy stutters

LONDON: Oil prices slumped nearly five percent Monday on data showing China's economic recovery stuttering under Covid-19 restrictions and a slumping property sector.

Stock markets mostly steadied and the dollar traded mixed as investors welcome signs of cooling US inflation, which nevertheless remains at the highest level in decades.

 "It's been an underwhelming start to the week in financial markets with the eternal optimism of investors clashing with the reality of Chinese economic data," noted Oanda senior market analyst Craig Erlam, reports AFP.

China's central bank slashed key interest rates in a surprise move Monday as a raft of data showed weakness in the world's second-largest economy.

The figures showed China's industrial production      and retail sales growth for July came in lower than expected.

Industrial production was up 3.8 percent year-on-year, but down from 3.9 percent in June and well below analysts' forecasts.

"The risk of stagflation in the world economy is rising, and the foundation for domestic economic recovery is not yet solid," China's National Bureau of Statistics warned.

Stagflation refers to long-running high inflation combined with rising unemployment and weak growth.

Beijing's rigid adherence to a zero-Covid strategy has held back economic recovery as snap lockdowns and long quarantines batter business activity and a recovery in consumption.

July's retail figures confirmed how fragile consumer confidence remains, said CMC Markets analyst Michael Hewson.

"This weakness in the Chinese economy comes against the struggle to adapt to a zero-Covid policy, which the government shows little sign of relaxing, against a backdrop of rising cases," Hewson said.

"Problems in the property sector also aren't helping, where many home buyers are halting mortgage payments in protest at delays to the completion of new homes."