Chinese equities post modest gains, IMF lowers global growth forecast

6:18 AM 9 October 2018

Summary:

  • JPY gains on risk aversion

  • Pompeo’s visit to Beijing did little to ease the trade conflict

  • IMF lowers forecast for the global growth highlighting trade issues as main reason

Trading during the Asian session was a bit thinner than usual as South Korea investors took a day off for holiday. In China we saw a modest recovery after yesterday’s heavy sell-off. All major Chinese stock indices pushed higher on Tuesday with Hang Seng (CHNComp) trading 0.9% higher at press time. Equities in the World’s second biggest economy could have been support by the FX factor as the PBOC set USD/CNY central rate higher (6.9019). Japanese Nikkei (JAP225) declined 1.3% following strengthening of JPY. Last but not least, in Australia S&P/ASX 200 (AUS200) slumped almost 1% erasing whole YTD gains and is now 0.77% below 2017’s close.

Start investing today or test a free demo

Open real account TRY DEMO Download mobile app Download mobile app

After two session of heavy selling AUS200 (S&P/ASX 200 futures underlying) found itself below 200-session moving average. As the Australian stock market is sensitive to the trade war due to countries relationship with China further escalation of conflict may cause the index to visit the support zone ranging 5915-5925 pts. Source: xStation5

Aforementioned strengthening of the Japanese yen can be to some extent ascribed to increasing risk-off sentiment on the markets. Investors flew to safe haven assets after reports from the Michael Pompeo’s visit to Beijing showed the that rift between China and the US is widening. The US Secretary of State highlighted fundamental disagreements between two countries ranging from trade issues, through Taiwan and to the South China Sea. No breakthrough happened when it comes to trade relationships and no new developments concerning the disarmament of the North Korea spurred. Having said that, Pompeo’s visit to Asia resulted in nothing more than new signs of deepening tensions between the World’s two biggest economy. Apart from that, Bloomberg reported that the US Treasury Department may be set to name China a currency manipulator in a report scheduled to be out next week. According to the news agency Steven Mnuchin’s department is concerned with the recent depreciation of the Chinese yuan.

USDJPY reversed after climbing to the vicinity of multi-month highs around 114.30 handle. The pair is declining for the fourth straight day and a further pullback towards the 111 handle may be on cards. Source: xStation5

Another issue that could have supported a retreat to the safe haven markets is the updated global growth forecast from the International Monetary Fund. IMF revised lower its outlook on the global growth to 3.7% for 2018 and 2019 from 3.9% forecasted three months ago. It is the first downgrade the IMF made to the global growth forecast since mid-2016. The Fund said that the World may already be at peak of its growth cycle. Among reasons behind downgrade IMF named escalating trade conflict and unstable situation on the EM markets. Additionally, IMF highlighted that faster than previously expected pace of interest rates hikes in the developed countries bolsters capital retreat from the emerging economies and therefore further undermines perspectives for these countries. The outlook for the US was left unchanged in 2018 but IMF expects growth to slow in the years to come as the impact of the trade war with China will take its toll. Finance ministers and central bankers from the IMF and World Bank member countries will meet this week in Indonesia for the annual meeting. Trade issues are said to be on top of the agenda.

IMF revised lower the growth forecast for the whole World as well as EMs and eurozone. Source: Bloomberg, IMF

In other news:

  • Hurricane Michael is approaching the east coast of the North America

  • Italy Finance Minister Tria to defend Italian budget in parliament

  • US 10-year yield hits 7-year high near 3.25

  • VIX broke above 15 pts handle for the first time since June

  • ECB’s Villeroy says combination of the Italy’s growth and debt is “too unbalanced”

Share:
Back
Xtb logo

Join over 935 000 XTB Group Clients from around the world

The financial instruments we offer, especially CFDs, can be highly risky. Fractional Shares (FS) is an acquired from XTB fiduciary right to fractional parts of stocks and ETFs. FS are not a separate financial instrument. The limited corporate rights are associated with FS.
This page was not created for investors residing in Brazil. This brokerage is not authorized by the Comissão de Valores Mobiliários (CVM) or the Brazilian Central Bank (BCB). The content of this page should not be characterized as an investment offer in Brazil or for investors residing in that country.
Losses can exceed deposits

We use cookies

By clicking “Accept All”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts.

This group contains cookies that are necessary for our websites to work. They take part in functionalities like language preferences, traffic distribution or keeping user session. They cannot be disabled.

Cookie name
Description
SERVERID
userBranchSymbol cc 2 March 2024
test_cookie cc 25 January 2024
adobe_unique_id cc 1 March 2025
__hssc cc 8 September 2022
SESSID cc 2 March 2024
__cf_bm cc 8 September 2022
intercom-id-iojaybix cc 26 November 2024
intercom-session-iojaybix cc 8 March 2024

We use tools that let us analyze the usage of our page. Such data lets us improve the user experience of our web service.

Cookie name
Description
_gid cc 9 September 2022
_gat_UA-98728395-1 cc 8 September 2022
_gat_UA-121192761-1 cc 8 September 2022
_gcl_au cc 30 May 2024
_ga_CBPL72L2EC cc 1 March 2026
_ga cc 1 March 2026
__hstc cc 7 March 2023
__hssrc

This group of cookies is used to show you ads of topics that you are interested in. It also lets us monitor our marketing activities, it helps to measure the performance of our ads.

Cookie name
Description
MUID cc 26 March 2025
_omappvp cc 11 February 2035
_omappvs cc 1 March 2024
_uetsid cc 2 March 2024
_uetvid cc 26 March 2025
_fbp cc 30 May 2024
fr cc 7 December 2022
_ttp cc 26 March 2025
_tt_enable_cookie cc 26 March 2025
_ttp cc 26 March 2025
hubspotutk cc 7 March 2023

Cookies from this group store your preferences you gave while using the site, so that they will already be here when you visit the page after some time.

Cookie name
Description

This page uses cookies. Cookies are files stored in your browser and are used by most websites to help personalise your web experience. For more information see our Privacy Policy You can manage cookies by clicking "Settings". If you agree to our use of cookies, click "Accept all".

Change region and language
Country of residence
Language