New inflation data from China’s National Bureau of Statistics indicates that the China’s inflation level was 3.6 % in March, slightly higher than the 3.2% level in February but still below China’s inflation target of 4% for 2012. Economists had previously forecasted a Chinese inflation rate of 3.3% for March.
Rising food and fuel costs are to blame for China’s higher inflation level.
Economists believe that the recent uptick in China’s inflation makes it more unlikely for China’s central bank to engage in further easing measures for the first part of 2012. If interest rates are cut through monetary easing while there is a wider availability of money at lowered interest rates, the net result could be higher consumer prices throughout the Chinese economy.
China’s central bank has already taken steps to engage in monetary easing through lower interest rates to help drive the growth engine for China’s economy which has been cooling due to lower exports to Europe and a real estate market that has witnessed a pullback.
During the 4th quarter of 2011, China’s GDP grew to 8.9%. However, the Chinese government has already lowered its growth target for 2012 to 7.5%, an 8 year low. China will report their 1st quarter 2012 GDP number later on Friday. Economists are expecting 8.3% GDP growth for the 1st quarter of 2012.
U.S. Equity Futures
U.S. equity futures are pointing to a much lower opening on Monday during opening bell as the market still needs to come to terms with the disappointing jobs report that was released last Friday when the equity market was closed in addition to the new inflation data released from China.
Last week U.S. equities experienced their biggest weekly decline in 2012. Some analysts are questioning if the bull run in U.S. equities is over or just losing steam for now.
Oil futures moved lower after it was announced that Iran agreed to new talks with the U.S. and its allies (Great Britain, France, Germany, Russia, and China) over Iran’s nuclear enrichment program. The talks will begin on Saturday in Istanbul, Turkey.
North Korea is getting ready to launch a rocket into space this week. North Korea’s government claims that their rocket will only carry a weather satellite into space but the U.S. and South Korea believe that it’s a test of a ballistic missile.