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Global Market Update: China's Economic Strength, Inflation Trends, and Oil Market Dynamics
Strong industrial output and retail sales data in China, along with news of a significant stimulus plan to boost the housing market, contributed to a sense of optimism in the markets. The MSCI's broadest index of Asia-Pacific shares, excluding Japan, surged by 2.7%, while the Hang Seng in Hong Kong saw a nearly 4% rise. Mainland property developers also experienced a strong rally, with gains of over 5%.
Strong industrial output and retail sales data in China, along with news of a significant stimulus plan to boost the housing market, contributed to a sense of optimism in the markets. The MSCI's broadest index of Asia-Pacific shares, excluding Japan, surged by 2.7%, while the Hang Seng in Hong Kong saw a nearly 4% rise. Mainland property developers also experienced a strong rally, with gains of over 5%.
China's retail sales for October showed a 7.6% increase, a figure that may have been influenced by the Golden Week holiday. However, the real estate sector continues to face challenges, with a year-on-year investment decline of 9.3%. It is expected that Beijing will provide increased support through fiscal and monetary measures to aid in the sector's recovery.
In Europe, stocks recorded gains, with the pan-European STOXX 600 index rising by 0.8 %. This was partly due to UK inflation data, which pointed to a slowdown and impacted sterling. It also supported expectations of an interest rate cut by the Bank of England by the middle of next year. The UK's consumer price index rose by 4.6% in the 12 months to October, a fall from the 6.7% rise in September, increasing the likelihood of a potential rate cut.
U.S. inflation data had a significant influence on global markets, as U.S. headline consumer prices remained flat in October, and core CPI came in below expectations. This supported the view that the Federal Reserve might pause its interest rate hikes.
Late on Tuesday, the House of Representatives passed a bill aimed at avoiding a government shutdown, which will now be sent to the Senate for a vote. If approved by lawmakers, the legislation will then go to President Joe Biden. Without a funding bill in place, the federal government is set to shut down on Friday.
Investors are now awaiting U.S. retail sales data and the producer price index (PPI) on Wednesday for further insights into the Federal Reserve's interest rate outlook.
The International Energy Agency's announcement that the oil market for the current quarter won't be as tight as initially expected was attributed to better-than-anticipated production growth in the United States and Brazil. This assessment contradicted OPEC's view, which emphasized strong growth trends and healthy fundamentals in the oil market.
In addition, the American Petroleum Institute reported a 1.3 million barrel increase in U.S. crude inventories last week, along with a simultaneous 1.1 million barrel rise in stockpiles at the Cushing, Oklahoma hub.