Week 20 Wrap: EU-to-China cargoes up 12% YTD; US CPI tame

The week kicked off with China issuing new long-term bonds to raise ¥1T yuan in a bid to revive its economy, according to Reuters. In my view, it feels like people have been waiting for Chinese stimulus since late 2022. So far, nothing the Chinese government has introduced to date has worked.

Still, JP Morgan on Tuesday said it was “tactically bullish” on the country’s stock markets – when the CH50 index was up over 3% MoM (but conversely down about -4.5% YoY.) Still, a MoM gain isn’t worth nothing.

I talked about China last week too, notably, with a view towards Germany and France warming their relationships with Australia’s largest and most tenuous trading partner. Interestingly, EU-to-China freight cargos are up 12% in the first four months of 2024.

Maersk shares, meanwhile, jumped close to 8% on Monday as the price of shipping from China to Europe climbed on June futures markets, due to unforeseen demand (and the Red Sea issue.)

Has Europe found a new bestie, or has China? All this talk of US tariffs is probably important to consider, here. Speaking of: Biden introduced some related to EVs and solar panels midweek.

We also got the Oz budget on Tuesday – with critical mineral spending initiatives the most relevant things for everyday ASX investors to consider. While housing initiatives were included in the budget too, it wasn’t until the US inflation read came in not-as-scary-as-it-could-be, and that made the real estate sector leader of the pack on Thursday.

Now, here’s the economics speedwrap paragraph – US inflation dominated all this week. We got USA PPI on Tuesday, and CPI on Wednesday – PPI was hotter than expected at a core YoY rate of +2.4%, which caused jitters, but CPI came in at +3.4% YoY on a headline read, suggesting a mixed story of sticky services inflation, but, an overall disinflationary journey – even if slower than expected. Helping lubricate everything was that it didn’t go above expectations.

Australia, meanwhile, released wage growth for Q1 on Wednesday, coming in at 4.1% YoY. This followed Tuesday’s ANZ data drop showing consumer spending actually increased close to 6% YoY. Australian unemployment data released Thursday, meanwhile, showed the rate hit 4.1% in April. Again, mixed, but on the whole, nothing too crazy. As above as is below: like the US, Australian job growth was pretty much only part-time roles. But whether that means anything or not remains to be seen.

Meanwhile, the EU GDP growth rate has clocked in at +0.4% YoY and +0.3% MoM. Meanwhile, Japan’s GDP came in lower than expected at -0.5%. They get a second read like that, and the country is in recession.

But whether or not world markets actually care about what happens in Japan seems to be based on vibes at the time. As for Australia, probably more important is the Chinese data we got on Friday.

Notably, Industrial production was above estimates at +6.7% vs +4.5% expected. So that’s good news. Chinese retail sales, however, came in below estimates at 2.3% vs 3.1% expected. If you can figure out what that means you could probably get a job at Oxford Economics.

Finally, in the background, Chinese unemployment was the least volatile of the Friday data drops: it came in at +5% vs 5.2% expected. As ever with Chinese data, we’re going to need more than numbers to fill in the shapes with colours.