On Tuesday, Asia-Pacific stocks were mixed. First quarter GDP readings were particularly scrutinized, as investors closely watched trade developments and other economic indicators from throughout the region. The dramatic swings in either direction reflect growing concern over the deterioration of the U.S.-China trade relationship. Second, they call out mixed economic signals from key markets such as China and Indonesia.
Erik Weisman, chief economist at MFS Investment Management, indicated that Federal Reserve Chair Jerome Powell is “all but certain to express a wait-and-see attitude” during the upcoming Federal Open Market Committee meeting. This thoughtful mood goes hand in hand with the broader risk-off stance investors are taking given mixed economic data.
Just last week, fresh figures out of China tracked a record surge in consumer spending over the May Day holiday. Expenditures increased 8% y-o-y to 180.27 billion yuan (approx $24.92 billion). This increase in outlays has offered a rare bright spot of positive news in a sea of doom and gloom over the country’s economic path. It was a struggle for China’s crucial services sector, where activity slumped to a seven-month low in April.
New order growth is very quickly drying up in China. Experts closely familiar with this decline cite it to the continuing swirling unknowns around U.S.-imposed tariffs on Chinese exports. Rupert Mitchell, author of “Blind Squirrel Macro,” stated during a segment on CNBC’s “The China Connection” that a rapid resolution to trade tensions is “completely unrealistic.” He further elaborated, “US equities are currently pricing a complete sort of evaporation of the trade tension within a matter of weeks, and I just don’t see that.”
At the macroeconomic level, economic strategies in Indonesia are changing quickly. Now, the country is identifying priority sectors that will lead growth in the coming 20 years. Their key areas are energy transition, healthcare, digital infrastructure, and food and energy security. Pandu Sjahrir, Chief Investment Officer at Danantara, noted that the sovereign wealth fund will adopt a more transparent approach, stating, “Think of us almost like a public company.”
The country’s benchmark Nifty 50 fell by 0.29%. At the same time, the BSE Sensex fell by 0.22%, underscoring the volatile trading environment. Analysts cautioned that these movements represent the wariness of investors, looking for direction among mixed economic indicators. It’s the first time the central bank revised this year’s growth estimate. It recently lowered that prediction to between 1.3% and 2%, down from an original forecast of 2.9%.
In Thailand, core inflation jumped past estimates. It was up 0.98% y/y, higher than Reuters poll’s expected 0.89% increase. This inflationary pressure complicates the policy landscape even further, making it difficult for policymakers to pursue growth and price stability.
China’s CSI 300 index managed to gain traction, rising by 0.77% as of 10:50 a.m. local time after experiencing declines in previous sessions. The iShares Core CSI 300 ETF reflected this upturn, indicating a potential rebound in investor confidence despite broader economic concerns.
Even as the pandemic recedes, businesses are feeling all sorts of pressures that are leading to job market contractions. As Amala Balakrishner reported, employment shrank for the second month in a row, the fourth contraction in the last five months. She also observed that as businesses scramble to find ways to save money by dramatically cutting staff, they are creating even larger backlogs of work incredulously.
Looking forward, investor sentiment will be determined by the strength of upcoming economic data and any positive movement on global trade negotiations. Weisman highlighted that “the chaos of U.S. tariff policy leaves the future macroeconomic landscape especially challenging to discern,” adding that with the Fed having recently slowed the pace of quantitative tightening (QT), Powell will likely refrain from making significant changes in policy in the near term.
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