Markets buoyed by China stimulus hopes

GLOBAL STOCK markets rose on Tuesday as slack Chinese consumer price figures stoked expectations of more stimulus policies.

China’s consumer price index rose 1.8 per cent last month over a year earlier, slower than June’s 1.9 per cent. The July figure is the third monthly drop in a row since April, when the consumer price index reached its highest level since July 2014. It also was below the government’s three per cent inflation target.

The news came a day after China reported exports fell in July, and increased investors’ expectations of more stimulus measures from Beijing to soften the economy’s slowdown.

In Asia Tuesday, Japan’s Nikkei 225 finished 0.7 per cent higher at 16,764.97 and South Korea’s Kospi climbed 0.6 per cent to 2,043.78. Hong Kong’s Hang Seng index fell 0.1 per cent to 22,465.61 while China’s Shanghai Composite Index gained 0.7 per cent to 3,025.68.

In Europe, Britain’s FTSE 100 added 0.4 per cent to 6,832 and France’s CAC 40 gained 0.6 per cent to 4,443. Germany’s DAX rose 0.8 per cent to 10,516.

China’s exports fell again in July by an unexpectedly wide margin, while a decline in imports accelerated in a possible sign of weakness in the world’s second-largest economy.

Exports contracted 4.4 per cent to US$184.7 billion, a slight improvement over June’s 4.8 per cent contraction, customs data showed Monday. Imports fell 12.5 per cent to $132.4 billion, accelerating from a decline of 8.4 per cent.

ECONOMIC WEAKNESS

Weak global demand has hampered efforts to shore up Chinese trade and stave off job losses in export industries. The contraction in imports reflects possible weakness in the domestic economy, but the figures also are depressed by a decline in prices of oil and other commodities.

Chinese economic growth held steady at 6.7 per cent in the quarter ending in June compared with a year earlier, though that was the lowest quarterly level since the aftermath of the 2008 global crisis.

The declines in both exports and imports were worse than many forecasters expected.

“The data dash hopes that a pickup in global manufacturing growth last month might have buoyed shipments from China,” said Julian Evans-Pritchard of Capital Economics in a report.

“The country’s export growth is likely to remain subdued for some time,” said EvansPritchard. “While we think the worst is probably over for many emerging markets, global growth is likely to remain lacklustre well into next year.”

The slump in imports meant China’s global trade surplus swelled by 22 per cent from the same month a year ago to US$52.3 billion.

China’s trade surplus with the European Union, its biggest trading partner, was US$11.8 billion. The surplus with the United States was US$24.7 billion.

Even taking lower prices into account, the Chinese figures suggest imports fell by 5.3 per cent, according to Louis Kuijs of Oxford Economics.

“It implies that volumes dropped substantially month-onmonth,” said Kuijs in a report. “It may herald that domestic demand started to slow down in July.”