Summary:

• Asian equity markets begin the new week noticeably lower
• China’s GDP slows down but matches expectations in the second quarter, other monthly releases mixed
• Pound climbs having the crucial week ahead

Most of Asia-based stock markets have begun the new week noticeably lower even as Wall Street managed to retain moderate increases on Friday. Over the weekend we did not get any particularly shocking revelations therefore one may suppose that downbeat moods might be a by-effect of slightly slower GDP growth of the Chinese economy as well as simmering concerns pertaining to trade wars. As of 6:31 am BST the Hang Seng (CHNComp on xStation5) is the largest laggard being down 0.85%, the Shanghai Composite is falling a notch more than 0.7% while the Australian blue chips index is slipping 0.45%. Let us remind that the NIKKEI (JAP225) is not trading today due to Ocean’s Day in Japan.

The Chinese economy slowed down a bit in the second quarter while other monthly prints for June were mixed. Source: Bloomberg

During the second quarter of the year the China’s economy expanded 6.7% making a dip from 6.8% seen in the first three months but matching economists’ expectations anyway. Notice that amid reasons standing behind a slowdown one may single out the Chinese quest for cracking down on risky credit and inflated indebtedness among companies. As far as the trade spat with the US is concerned one may argue that those effects have yet to be taken into calculations as impacts might be delayed by a few months or so. However, if both countries keep slapping new duties, other trade barriers on each other, one may expect that the third quarter may be more depressed solely on the back of sluggish trade. Meanwhile, along with the GDP readings we were also offered monthly industrial data for June. Retail sales grew 9% beating the consensus at 8.8%, industrial output increased 6% and fell short of the median estimate at 6.5%, and fixed assets investment (cumulative, stripping out rural ones) rose 6% and met expectations.

At the end of the last week we pointed out that a long-legged doji was unlikely to bode well for bulls. Today one may confirm this thesis as the Chinese CHNComp has moved appreciably lower, and if this move continues the index may test 10440 points relatively soon. Source: xStation5

Even as stocks in Asia are moving down on the currency front one may spot increased risk appetite as the greenback is in a subtle retreat in the morning while the NZ dollar is the strongest major currency gaining 0.4% as of 7:00 am BST. Notice that the kiwi was not influenced by a massive decline of services PMI which fell to 52.8 in June from 57.1. The pound is the second best major currency, and given that it has a lot of macroeconomic readings this week (we are going to present a full tally of them in the calendar post) one may suppose that the GBP might be among the most eagerly traded currencies in the G10 basket this week. What’s more, technically the pair looks also encouragingly as it has managed to stay above 1.3050.

The GBPUSD is bouncing off the support ahead of the crucial data this week. Source: xStation5