Asian markets were mixed as China’s economy showed signs of weakness and domestic demand failed to recover as much as expected after the pandemic. European stocks, on the other hand, were generally higher. Benchmark indices in Paris, London, and Tokyo rose, but Shanghai and Sydney saw a decline. US futures fell slightly. Crude oil prices recorded a modest rise. Germany’s DAX rose 0.1%, while London’s FTSE 100 rose 0.2%. However, the CAC40 in Paris fell by 0.1%. The outlook for the S&P 500 remained unchanged, but the Dow Jones industrials fell 0.1%.
China’s post-pandemic economic recovery is facing pressure from weak consumer and export demand, as per government officials. Retail sales and other activity remained weaker than expected in April. Retail sales increased by 18.4% year-on-year, up by 7.8 percentage points from March. Factory production rose by 5.6% year-on-year but fell by 0.5% from March. Investment in factories, property, and other fixed assets increased by 4.7% in the first quarter of 2023, down by 0.4 percentage points from Q1 growth. According to Capital Economics’ Julian Evans-Pritchard, the post-pandemic recovery is likely to “fizzle out” in the second half of the year.
Tokyo’s Nikkei Stock Average climbed 0.7%, while Hong Kong’s Hang Seng Index rose by less than 0.1%. On the other hand, the Shanghai Composite Index fell by 0.6%. The S&P 500 increased by 0.3% on Monday, while the Dow Jones Industrial Average rose by 0.1%. The Nasdaq Composite Index rose to 0.7%. With several concerns dragging sentiment down, markets have been relatively quiet. The primary concern is the possibility of a recession later this year, primarily due to high-interest rates aimed at keeping inflation down. The potential cracks in the U.S. banking system and moves toward the possibility of the U.S. government defaulting on its debt as early as June 1 are also significant concerns.
Unless Congress raises the credit limit it has set for federal borrowing, the federal government faces an imminent risk of defaulting for the first time in history. U.S. Treasuries form the foundation of the global financial system. One concern, however, is that politicians may feel little urgency to reach a deal until financial markets shake up enough to convince them of its importance. In other trading, US benchmark crude rose by 20 cents to $71.31 a barrel in electronic trading on the New York Mercantile Exchange. International benchmark Brent crude rose by 24 cents to $75.47 a barrel. The dollar fell from 136.12 yen to 135.75 yen, while the euro rose from $1.0875 to $1.0889.