Weekly Market Recap

Gettin’ in tune

26/07/2021

Week in review

Australia preliminary retail sales -1.8% m/m in June
ECB keeps policy rate unchanged at 0.0%
Eurozone consumer confidence dips to -4.4 for July

Week ahead

Australia 2Q CPI inflation
U.S. 2Q real GDP growth
U.S. Fed Funds rate and FOMC meeting

Thought of the week

When it comes to China, much of the rhetoric is either about its fantastic rate of growth or the impending doom from elevated debt and risky credit. Neither is the case. The pace of Chinese economic growth dropped from 18% y/y in the first quarter of the year, to 8% in the second quarter as the pandemic-induced comparisons subsided. There were excited gasps from corners of the market about an over correction in policy as the credit impulse slowed sharply (see chart) and the cut in the reserve requirement ratio was cited as further evidence. The reality is that China has recovered from the economic effects of COVID and is returning to more normal levels of economic activity. Both the domestic and external sectors of the economy have shown resilience in recent months. Any musician will tell you the importance of keeping your instrument in tune, and Chinese officials have had a lot of practice in fine-tuning the policy levers to keep the economy humming along.

China’s credit impulse

% of nominal GDP, change year-over-year

Source: CEIC, J.P. Morgan Asset Management. Data reflect most recently available as of 23/07/21.
All returns in local currency unless otherwise stated.
Equity price levels and returns: Levels are prices and returns represent total returns for stated period.
Bond yields and returns: Yields are yield to maturity for government bonds and yield to worst for corporate bonds. All returns represent total returns. AusBond Comp is the AusBond Composite 0+ Yr, AusBond IG is the AusBond Credit 0+ Yr both provided by Bloomberg.
Currencies: All cross rates are against the Australian dollar. An appreciation of the foreign currency against the Australian dollar would be positive and a depreciation of the foreign currency against the Australian dollar would be negative.

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