Economic Updates: Positive Trends in China and Germany, Bearish Signals in the US
Chinese data presents unexpected growth signals; Germany’s EUR 500bn spending plan boosts euro; US equities show risks of correction amid low consumer sentiment; Federal Reserve’s policy decisions will be closely observed in light of recent economic conditions.
Recent data from China revealed unexpected positive indicators, including an acceleration in fixed asset investment and growth in retail sales reaching 4%. However, the rise in the unemployment rate and concerns surrounding the property crisis and declining population persist. In response, Chinese authorities have committed to stabilizing the stock and property markets while addressing the birth rate issue. The Hang Seng index increased by approximately 0.70%, whereas the CSI 300 index is hesitant to follow suit before further government announcements.
In Germany, Friedrich Merz’s agreement with the Greens aims to unlock a EUR 500 billion debt-financed infrastructure and defense spending bill, which has raised German yields and boosted the euro. This spending initiative is expected to enhance growth and productivity within Europe. Nonetheless, it may also increase inflation, potentially prompting stricter policies from the European Central Bank. The EUR/USD could target the 1.10 psychological level as the euro gains strength against the backdrop of the UK’s deteriorating economic outlook.
On the equity front, the European Stoxx 600 has remained stable near its 50-DMA. The FTSE 100 rebounded after several days below this threshold, while the S&P 500 experienced a correction after a significant decline. Although Friday’s trading improved due to oversold conditions, consumer sentiment in the US hit its lowest since November 2022, raising concerns about prolonged market corrections. Analysts suggest a possible 5-10% further downside for US equities.
The Federal Reserve’s upcoming decisions are under close scrutiny, with expectations to maintain rates unchanged. Investors are attentive to indications from Jerome Powell concerning how US economic prospects may be influenced by ongoing trade tensions. Amidst these developments, gold prices soared above $3,000 an ounce, with projections suggesting an increase to $3,500 due to geopolitical uncertainties.
This report, provided by Swissquote Bank Ltd, is intended solely for informational purposes and should not be construed as an offer to engage in financial transactions.
The recent positive economic data from China presents an encouraging outlook amid persistent challenges like unemployment and property market concerns. Germany’s infrastructure spending plan is expected to enhance euro valuation amidst an uncertain UK economy. In the US, equities faced correction risks fueled by disappointing consumer sentiment while the Federal Reserve’s upcoming decisions will significantly impact the dollar and gold prices. Investors are advised to remain vigilant as these developments unfold.
Original Source: www.fxstreet.com
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