Equities and Commodities Slide After Disappointing China Data, Dollar Eases on Rate Cut Speculation

Equities and commodities faced a decline in the market following disappointing data from China, indicating slower economic growth than anticipated. China’s GDP for the second quarter rose by 0.8%, surpassing the predicted 0.5% growth. However, the annual pace of growth was below expectations at 6.3%, instead of the forecasted 7.3%. This news has led to a decrease in global shares and commodities, as investors worry about the impact on the Chinese economy. The dollar also eased as traders increased their bets for a potential end to U.S. interest rate hikes. Last week, the dollar experienced its largest weekly decline of 2023, dropping 2.3%. This week’s data macro calendar is light, and with Fed officials in their “blackout period” ahead of the July policy meeting, market moves will be determined by whether the previous week’s trends will continue or reverse. Global equities saw a 0.1% decrease, with European shares being hit particularly hard by weaknesses in China-sensitive sectors such as mining. However, U.S. stock index futures remained relatively steady ahead of a busy week of corporate earnings. Notable companies reporting this week include Tesla, Bank of America, Morgan Stanley, Goldman Sachs, and Netflix. Additionally, U.S. retail sales data are expected to show a rise of 0.3% ex-autos, reinforcing the market’s favored soft-landing theme. The market currently implies a 96% chance of the Fed hiking rates this month, but only a 25% probability of another increase by November. Two-year U.S. Treasury yields fell by 2 basis points to 4.728%. The dollar fell 0.3% against the yen and the euro rose 0.2% against the dollar. Sterling also rose 0.1% against the dollar ahead of UK inflation figures. Crude oil prices faced a sharp drop following the China GDP data, which raised concerns about demand from the world’s largest energy importer. Brent crude futures fell by 1.6% to $78.60 per barrel, while copper, also affected by Chinese data, dropped 2.1% to $8,490 per tonne.