ASX starts the week on a positive note: Aus shares 0.4% higher at noon

At noon, the S&P/ASX 200 is 0.37 per cent or 26.10 points higher at 7058.60, while the SPI futures are pointing to a rise of 24 points.

Shares in the Asia-Pacific rise ahead of Chinese economic data

Investors are awaiting economic data from China, including on industrial output and retail sales.

Japan’s Nikkei 225 increased 0.53 per cent, while the Topix index added 0.23 per cent.

China’s industrial output is likely to have grown 4.6 per cent in July from a year ago, according to a Reuters poll. That figure stood at 3.9 per cent in June. Retail sales likely increased 5 per cent in July compared with the same period in 2021, compared to a 4 per cent gain in June.

Indian and South Korean markets are closed for a holiday today.

Japan’s Q2 GDP slightly softer than expected, prior quarter contraction revised away

Japanese GDP expanded 2.2 per cent q/q annualised in Q2, compared to the consensus 2.6 per cent. The prior quarter was revised to 0.1 per cent growth from a 0.5 per cent contraction. Private consumption alone contributed 2.5 ppt, followed by 0.9 ppt from private non-residential investment, though this was pared by drags from private inventory accumulation. Public demand was mildly positive — public investment increased for the first time since 4Q20. External demand contributed marginally as export growth combined with lower imports.

Employee compensation shrank for the second straight quarter. The GDP deflator fell 0.4 per cent y/y, extending declines to a sixth straight quarter. However, the domestic demand deflator rose 2.6 per cent y/y, eclipsing the recent high of 2.4 per cent in 2Q14.

While upward revision to the prior quarter complicates the debate over the risk of technical recession, the latest result is seen backward-looking in the context of renewed Covid risk, as case numbers have rebounded to new records. For now, the latest JCER consensus forecast looks for GDP growth to remain mostly steadily in Q3.

People’s Bank of China cuts medium-term lending facility rate by 10 bp

PBOC surprised by cutting its MLF and seven-day repo rate as the country continues to grapple with slowing economic growth. It had been expected to keep the rate unchanged for the seventh consecutive month while partly roll over maturing MLF loans. The bank injected CNY400B via 1Y MLF versus CNY600B maturing, with the rate cut by 10 bp to 2.75 per cent. It also injected CNY2B via 7D reverse repos with the rate cut by 10 bp to 2.10 per cent.

Chinese lending data much weaker than expected

New loans totaled CNY679B in July, below the consensus of CNY1.10T, and follows CNY2.81T in the previous month. Sequential weakness was broadly based, though driven mainly by corporate demand. Outstanding loan growth was 11.0 per cent y/y vs the consensus and prior month’s 11.2 per cent.

Xi-Biden meeting may be in the works for November

There is some attention on a WSJ report that China’s President Xi may meet with Biden in November.

China is in the early stages of planning a Southeast Asia trip for Xi, marking a resumption of overseas travel duties since January 2020. The meeting could happen on the sidelines of the Bali G20 summit on 15-16 November, or at the Bangkok APEC two days later. Some think the international trip reflects confidence in Xi’s prospects for claiming a third term as party leader at the national congress set for this fall, presaging resumption of overseas diplomacy. Another implication may be that it could signal the beginning of a meaningful relaxation of Covid restrictions on international travel. The hotel quarantine period for inbound travellers was cut to seven days in June from a prior 14 days. Recall that Xi and Biden spoke on the phone days before Pelosi’s Taiwan visit in early August, and subsequent reports indicated Xi warned Biden not to “play with fire”. Reuters reported a second high-level US delegation arrived in Taiwan Sunday with plans to meet leader Tsai.

Best and worst performers

The best-performing sector is Information Technology, up 1.70 per cent. The worst-performing sector is Energy, down 0.78 per cent.

The best-performing stock in the S&P/ASX 200 is Core Lithium (ASX:CXO), trading 11.05 per cent higher at $1.63. It is followed by shares in PointsBet Holdings (ASX:PBH) and GPT Group (ASX:GPT).

The worst-performing stock in the S&P/ASX 200 is Beach Energy (ASX:BPT), trading 12.97 per cent lower at $1.61. It is followed by shares in Bendigo and Adelaide Bank (ASX:BEN) and AMP (ASX:AMP).

Commodities and the dollar

Gold is trading at US$1796.31 an ounce.
Iron ore is 1.6 per cent lower at US$108.85 a tonne.
Iron ore futures are pointing to a fall of 0.6 per cent.
One Australian dollar is buying 71.01 US cents.

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