A couple of dreadful data points from China earlier today is weighing on the mood a little as we look towards European trading, with the aussie and kiwi sinking and the dollar and yen holding slightly firmer for now. The PBOC also needed to cut rates in order to shore up demand conditions but that hasn't been enough to boost sentiment in domestic markets for the most part.
There are still many lingering concerns surrounding the property market in China and growing worries on the economy won't provide much comfort to those expecting the country to navigate a 5.0% to 5.5% growth in 2H 2022. Of note, ING has moved to slash China's GDP growth for this year to 4.0% from 4.4% previously. Expect more houses to slash their growth forecasts in the weeks/months to come.
The saying goes that when China sneezes, the rest of the world catches a cold. And while these are unprecedented times in the global economy, it is still rather divvy to try and play down the impact that China has on the world. I mean, you only have to look to supply chain issues over the past year for some idea on that.
At this point, one has to wonder can the rest of the world navigate a 'soft landing' when China itself looks to be struggling hard? That question will be one that risk trades will have to consider in the months ahead, as it will play a role in determining what sort of recession - and how deep - we will be facing in the coming quarters.
For now, with little else on the agenda in Europe, we might just stick to focusing on risk sentiment today with US futures pointing slightly lower by 0.2% now and FX flows offering up some risk aversion to start the day.
