China’s Shanghai Composite Index dropped 2.79 percent on Monday after a new report from China over the week-end showed that both Chinese imports and exports softened more than expected in April, highlighting weaker global demand and inherent challenges for China’s economy to rely on consumer demand to boost growth.
Chinese exports fell 1.8 percent in April after gaining 11.5 percent in March, according to China’s General Admin. of Customs.
Meanwhile, Chinese imports declined 10.9 percent in April after dropping 7.6 percent in April, revealing weaker than expected domestic demand in China on a consecutive basis despite heavy infrastructure spending from Beijing and an accommodative central bank that has already undertaken six interest rate cuts since 2014 and devalued the Chinese yuan in 2015 and early 2016.
China’s GDP growth slowed to 6.7 percent in Q1 2016 which comes after China’s 2015 GDP level declined to 6.9 percent, the weakest level in twenty-five years.
On May 5th a Markit/Chinese Caixin composite PMI data report, covering manufacturing and services, showed that for the second consecutive month overall business activity expanded in China during April and reached above the break even level of 50 with a reading of 50.8 in April, down from 51.3 in March.
“The Caixin China Output Index for April was 50.8, still above the neutral mark, but down 0.5 points from the previous month. Expansion in the services helped offset some of the impact caused by flagging manufacturing” said Dr. He Fan, Chief Economist at Caixin Insight Group in a note.
“Overall, however, the economy still faces relatively strong downward pressure. The government needs to keep implementing moderate stimulus to prevent a hard landing of the economy” Dr. He Fan continued.
On May 3rd, a Caixin China PMI Report for April showed that factory activity declined for 14 consecutive months and dropped to 49.4 in April, down from 49.7 in March.
The Week Ahead– U.S. Economic Calendar–
Following last Friday’s disappointing non-farm payroll report, the likelihood of an interest rate hike at the Fed’s June FOMC seems increasingly more remote.
The Bureau of Labor Statistic reported on Friday that the U.S. economy added 160,000 jobs in April, missing a 207,000 consensus forecast from briefing.com.
All three major U.S. indexes (Dow, NASDAQ, and the S&P 500) rose on Friday, boosted by hopes that the disappointing April jobs report would serve to lower the chances of an interest rate hike during the Fed’s FOMC meeting in June.
This week investors will be watching closely to retail sales for April that will be reported on Friday along with PPI data for April, Business Inventories (March), and Michigan Sentiment (May).
Economists from briefing.com estimate that retail sales picked up in April and have a consensus forecast of 0.8 percent increase in April after March’s retail sales declined -0.3 percent.
Full U.S. Economic Calendar
Tuesday- Jolts Job Openings (March), Wholesale Inventories (March)
Wednesday- MBA Mortgage Index, Crude Inventories, Treasury Budget (April)
Thursday- Continuing and Initial Weekly Claims, Import/Export Prices (April), Natural Gas Inventories
Friday- Retail Sales (April), PPI (April), Business Inventories (March) and Michigan Sentiment (May)