According to the forecasts of economists, the Chinese economy may be the one to recover the fastest from the crisis caused by COVID-19 and return to the state observed at the end of 2019 before the US economy and eurozone.
According to data published today, China's industrial output grew by 5.6% in August 2020 on an annual basis, rising from 4.8% a month earlier and exceeding market expectations, which were at 5.1%. It was the fifth consecutive month of industrial production growth and the fastest since December 2019. Currently, it seems that the Chinese economy has regained momentum after the shock caused by COVID-19. The biggest drop in production in China this year was 13.5 percent. Compared to the Eurozone, whose production fell by more than 28 percent in the worst month, and to the USA, where the drop was more than 16 percent, this is a very good result. In China, a further increase in production was observed for manufacturing, electricity, and mining.
This is not the end of good news from this Asian country. In August, for the first time in 8 months, there was an increase in retail sales. Sales rose 0.5 percent with a consensus assuming no changes. This meant the first increase in retail trade since December 2019, as consumption began to grow in line with the growth in economic activity after the COVID-19 restrictions gradually loosened.
Better data from China seems to have had a positive impact on financial markets. Dow Jones futures increased by nearly 100 points, S&P 500 gained nearly 10 and Nasdaq nearly 50 points on Tuesday morning, continuing the correction of previous strong declines. Additionally, investors may look forward to the dovish Fed representatives, who are starting their two-day meeting today. The result will be announced tomorrow at 8:00 p.m. along with a press conference which will start at 8:30 p.m.
For similar reasons, the US dollar seems to be losing value today. The EUR/USD rate has again come close to 1.1900, the USD/PLN rate has returned below 3.75 and the USD/JPY rate is at its lowest level since the end of August.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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