A look at the day ahead in markets from Sujata Rao.
With swathes of China spending April under lockdown — 46 cities according to one estimate — it was inevitable that dining out, shopping, factory output and energy usage would all take big hits.
The dire data overshadowed announcements that some COVID curbs would be loosened. A Q2 economic contraction looks inevitable. What’s more, the 6.7% urban unemployment rate — the highest since 2018 — won’t escape the notice of authorities, wary of any kind of unrest.
So after a series of half-hearted measures, a decisive policy response might finally be unveiled on Friday, when the People’s Bank of China meets to decide benchmark loan prime rates.
The central bank will be wary however, of further weakness in the yuan, already near 20-month lows to the dollar, and the possible implications for inflation.
Brent crude futures slid around 1.5 % on Monday but remain firmly above $100 a barrel. But the data has extinguished the brief spark of optimism that lifted Wall Street on Friday, with equity futures and bond yields both lower. The China-reliant Australian dollar has shed 0.7%
The optimistic may point to this month’s near-30 basis-point slide in five-year inflation expectations alongside a fall in where markets price U.S. interest rates would peak. But some, such as Goldman Sachs (NYSE:GS)’ ex-CEO Lloyd Blankfein, reckon those may amount to warning signals; recession is “a very, very high risk factor,” Blankfein said on Sunday.
In any case, a Friday survey showing U.S. consumer sentiment at an 11-year low bodes ill for upcoming retail sales data.
Finally, last week’s big movers, crypto and Twitter (NYSE:TWTR). Bitcoin has slid a further 5% but Twitter shares — with an Elon Musk takeover now in balance — are up 1% in Frankfurt trade after Friday’s 10% tumble. Musk’s weekend tweets may not help; he said there was “some chance” over 90% of daily active users were fake accounts”.