By Jamie McGeever
(Reuters) – A look at the day ahead in Asian markets from financial markets columnist Jamie McGeever.
The first round of key Chinese economic data this week came as a shock to those hoping the world’s second-largest economy would emerge from its deep slump. So what will round two bring on Wednesday?
Most likely another disappointment.
Wednesday’s figures are expected to show that Chinese consumer prices fell 0.4% in July from a year earlier, meaning China will become the first G20 country to experience deflation since Japan last two years ago Posted negative CPI growth.
With cracks reappearing in China’s property sector and Wall Street derailed by Moody’s downgrades of US banks, risk appetite in Asia is likely to be tight on Wednesday.
Risk to the CPI in July is likely to be on the downside after Tuesday’s trade data showed exports falling a more-than-expected 14.5% last month and imports falling more than twice as fast as expected.
No one can say they weren’t warned. Producer prices in China have been falling every month since October, and more importantly, the pace of the decline has accelerated this year.
June’s 5.4% drop marked the lowest factory gate deflation since 2015. Wednesday’s figures are expected to show a slight slowdown to 4.1% in July, but would anyone be totally shocked if deflation came in below forecasts?
According to Reuters polls, PPI forecast range is -6.1% to -2.9% and CPI range is -0.9% to 0.5%.
Staying with China, Country Garden said on Tuesday it had failed to pay two bond coupons totaling $22.5 million due Aug. 6, confirming market fears that China’s largest private project developer in repayment difficulties.
Hong Kong’s benchmark housing index fell nearly 5% on Tuesday, and with sentiment already badly dampened by trade numbers, China’s blue-chip CSI 300 index fell for a second day and the yuan fell to a four-week low against the dollar.
The story goes on
On the Asian corporate calendar, Bridgestone, Honda and Sony are among the big Japanese companies to release their latest earnings reports on Wednesday.
Asian equities are likely to go on the defensive after Moody’s downgrade of several US lenders reignited fears over the health of US banks and the economy.
Moody’s downgraded the ratings of 10 small- to mid-sized lenders by one notch and put six banking giants under scrutiny for potential downgrades. After falling within 5% of their highs last month, the S&P 500 and Nasdaq have fallen in five out of six sessions this month.
Here are key developments that could give markets more direction on Wednesday:
– China CPI and PPI inflation (July)
– Unemployment in South Korea (July)
– Japan broad money supply (July)
(By Jamie McGeever; Editing by Deepa Babington)
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