Week opens with mixed signals

The start of the week shows diverse sentiments across global markets.

China:

• Consumer Inflation: China saw consumer inflation rise to 0.6% year-over-year in August, marking the highest rate in six months but falling short of the 0.7% forecast. The increase is mainly attributed to higher food prices due to weather disruptions rather than stronger domestic demand.
• Producer Prices: The Producer Price Index (PPI) decreased by 1.8% year-over-year in August, a larger drop than the expected 1.4% and the biggest decline in four months. This indicates continuing deflationary pressures in the Chinese economy.
• Core Inflation: Excluding food and energy, core inflation fell to 0.3%, the lowest in nearly 3.5 years, prompting calls for more economic stimulus.

Japan:

• Economic Commentary: Sanae Takaichi, a candidate in Japan’s Liberal Democratic Party (LDP) leadership race, stated that a strategic deployment of fiscal spending would boost jobs, household income, and consumer sentiment. She also noted that it would increase tax revenues without raising tax rates and strengthen the economy.
• Economic Growth: Japan’s economy grew at an annualized rate of 2.9% in Q2, slightly below the preliminary estimate of 3.1%. Adjustments were made to figures for private consumption and capital expenditure.

Currencies

• Japanese Yen (JPY): The Yen remains weak across various currencies.
• Chinese Yuan (CNY): The onshore Chinese yuan weakened by 0.27% to 7.1088 per dollar following disappointing inflation data.
• Australian Dollar (AUD): The Australian Dollar is strong, rising by 0.1% against most major currencies.

Oil

• Early trading saw oil futures rise significantly. West Texas Intermediate (WTI) crude trading at $68.65, and Brent crude was at $72. This increase is partly due to concerns about a potential hurricane system approaching the U.S. Gulf Coast.

Metals

• Silver: The silver price has risen by 0.3% as weak U.S. labor data increases the likelihood of a Federal Reserve rate cut at its September meeting.
• Gold: Gold prices have stalled their decline from recent highs. Despite a mixed U.S. jobs report reducing the likelihood of a larger rate cut by the Fed, gold prices are seeing some support from concerns about the U.S. economic slowdown and geopolitical tensions. Currently, gold is trading just below the $2,500 mark. The reduced probability of a substantial 50 basis point rate cut by the Federal Reserve has led to a modest recovery in U.S. Treasury yields, supporting the U.S. Dollar and putting pressure on gold prices.