Major global equity markets edged higher on Monday as more weak data from China raised hopes that Beijing would crack down on the tech sector.
Traders were looking forward to US inflation data coming on Wednesday, as well as the start of earnings season at the end of the week.
It is pertinent to mention here that Chinese consumer inflation eased last month and producer prices fell, showing that the world’s number two economy continues to struggle. AFP informed of.
“The dire fear of a deflationary spiral in China has reached ‘code red’,” said Calvin Wong, analyst at OANDA Trading Group.
“Time is running out for Chinese policymakers to rule out a sharp decline in the internal demand environment, which could potentially lead to further erosion in consumer and business confidence.”
Stock traders were watching the inflation data as mounting pressure on Beijing to extend measures to support the economy.
“Those inflation reports and concerns about deflation have fueled speculation that China will soon announce additional policy stimulus measures,” said Patrick O’Hare on Briefing.com.
After a mixed session in Asia, European stocks were higher in afternoon trade and Wall Street’s direction was mostly positive as the session began.
Traders also continued to react to developments in the tech sector in China.
After a years-long investigation, Ant Group was fined nearly $1 billion for “illegal acts”, while Tenpay was ordered to pay more than $400 million.
Analysts said although the numbers were large, traders were upbeat on the prospect that companies would be able to focus on their businesses again.
In a statement, the China Securities Regulatory Commission said that “at present, most of the outstanding problems in the financial business of platform enterprises have been fixed”.
The news, announced on Friday, caused a jump in New York-listed shares of Alibaba and Tencent, and their Hong Kong shares also jumped on Monday.
“The market likes it because the investigation is likely to be over and the penalty, although large in absolute terms, is very manageable for such a large company,” said We-Sern Ling at Union Bankair Privy, referring to Ant.
A jump in market giants in tech companies lifted the Hang Seng index more than two per cent at Monday’s open, while Shanghai also saw gains.
At the end of the week, traders will get the latest reading of US consumer price inflation, which analysts expect to slow further in June to above 3 percent.
“According to the CME Fedwatch tool, the actual reading would have to be significantly below three percent to meaningfully reduce the likelihood of a 25 basis point hike from the current level of around 90 percent,” said City Index analyst Fawad Razakzada.
US Federal Reserve policy makers have clearly stated that they see at least one more rate hike as necessary to bring inflation under control, but the data may reduce the chances of another hike and thus stocks are held back by investors. It would be welcome.
Companies began reporting their second-quarter earnings this week, raising hopes that inflation has eroded profits for most companies.
Key figures around 1330 GMT
New York – Dow: up 0.2% at 33,812.34
LONDON – FTSE 100: Up 0.3% at 7,276.69
FRANKFURT – DAX: up 0.3% at 15,657.01
Paris – CAC 40: Up 0.5% at 7,145.36
Euro Stoxx 50: Up 0.4% at 4,255.45
Tokyo – Nikkei 225: down 0.6% at 32,189.73 (close)
Hong Kong – Hang Seng Index: up 0.6% at 18,479.72 (close)
Shanghai – Composite: up 0.2% at 3,203.70 (close)
EUR/USD: fell to $1.0961 from $1.0970 on Friday
Pound/dollar: down from $1.2836 to $1.2776
Dollar/yen: decreased from 142.08 yen to 141.83 yen
Euro/pound: up from 85.44 pence to 85.77 pence
West Texas Intermediate: down 0.8% at $73.29 a barrel
Brent North Sea crude: down 0.7% at $77.92 a barrel