As a result of worries about the Chinese economic growth and stronger-than-expected US retail sales data, which raised the possibility of another Fed rate hike, Asian markets declined this week. The increase in July sales, which was driven by internet purchasing, demonstrated that, despite the US economy’s slowdown, consumption has proven to be stronger than anticipated.
World Economy represented by coins foe further growth. (Source: Times Higher Education)
High Inflation Rate than Fed Wants
It has been questioned whether the US central bank has halted raising interest rates in its battle against inflation after some comments made by Neel Kashkari, head of the Minneapolis Fed. While inflation may be going in the right direction, it is still higher than the Federal Reserve would like, and it is still too early to declare success, according to Kashkari, a member of the Federal Reserve’s interest-rate-setting committee. While speaking at a conference in Minneapolis on Tuesday, Kashkari said, “I’m not ready to say that we’re done, but I’m seeing positive signs.” Rate cuts are still far off, according to the central banker, who stated that he would need to see “convincing evidence” that inflation is getting close to the Fed’s target inflation rate of 2.0%.
The US markets fell as a result of rate concerns and fresh banking sector jitters following a warning from a rating firm Fitch specialist about the dangers of a banking industry downgrade. The tech-heavy Nasdaq Composite Index fell 1.1 percent, the broad-based S&P 500 fell 1.2 percent, and the Dow fell just one percent. The unexpected retail strength may cause investors to question how far along the Fed is in its fight against inflation. Markets usually regard a robust consumer as favorable. Since demand is so high, rate increases may still be possible, according to Stephen Innes of SPI Asset Management.
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Asian Markets are Struggling
The overnight fall on Wall Street contributed to the risk-off mood in Asia, while data showing a further dip in new home prices in China in July added to worries about, Chinese economic growth in the world struggled since emerging from its epidemic isolation.
With Tokyo, Hong Kong, Seoul, and Sydney all falling by more than 1.0 percent, Asian markets were clearly in the red. Manila and Kuala Lumpur were the only cities to grow, while Shanghai, Taipei, Singapore, Bangkok, and Jakarta all declined. According to data issued by China’s National Bureau of Statistics on Wednesday, new home prices fell for a second consecutive month in July, providing another evidence of the challenges the heavily indebted real estate market and the larger economy are facing.
The information follows a slew of disappointing data released on Tuesday that showed sluggish growth in retail sales and industrial production. Following the release of the data, several institutions dropped their projections for China’s growth. According to Bloomberg, JPMorgan Chase reduced its estimate for 2023 from 6.4 percent to 4.8 percent, a significant decrease. Barclays decreased its forecast as well, to 4.5 percent.
According to the most current figures, Chinese’s economic growth target might find it difficult to meet its stated five percent growth goal set for the year.
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