NEW YORK/LONDON, Jul 17 (Reuters) – Global stocks fell and the dollar fell Monday after data showed China’s economy growing slower than expected, but US stocks rose on expectations that corporate earnings will beat forecasts and the American consumer will continue to spend.
China reported growth of 0.8% in the second quarter, above the forecast of 0.5%, while its annual growth rate slowed more than expected to 6.3%, well below expectations for a reading of 7.3% .
Analysts said the data suggests China’s post-COVID boom is over. But fears in the United States earlier this year of a hard economic landing have dissipated as slower consumer inflation has brightened the outlook for the US as companies report their second-quarter results.
“The corporate hurdle is a little higher than it has been in the past few quarters, but S&P 500 companies have largely beat analysts’ very low earnings season estimates,” said Anthony Saglimbene, chief market strategist at Ameriprise. Financial in Troy, Michigan.
“What the market will be looking for in the coming weeks is whether demand will continue and is the company’s outlook generally still positive for the rest of the year?”
Tesla is the first of the big tech names to report this week, along with Bank of America, Morgan Stanley, Goldman Sachs and Netflix.
Equities in Europe were weaker, with the pan-European STOXX 600 index (.STOXX) falling 0.60%, while MSCI’s US-focused measure of equities around the world (.MIWD00000PUS) was slightly lower at 0.01 %.
On Wall Street, the Dow Jones Industrial Average (.DJI) was up 0.18%, the S&P 500 (.SPX) was up 0.20% and the Nasdaq Composite (.IXIC) was up 0.47%.
The dollar was trading roughly flat against a basket of currencies after suffering its biggest weekly decline in 2023 last week as government bond yields plummeted.
The currency is likely to consolidate as investors await next week’s Federal Reserve meeting, when the US central bank is widely expected to raise interest rates by another 25 basis points.
June retail sales on Tuesday will be the key US economic data for the week, although the news is unlikely to affect the path of monetary policy or the direction of the market.
US retail sales data is expected to show a 0.3% increase excluding cars, continuing the slower trend but solid enough to fit the market’s favored theme.
Futures are pricing in an additional 32 basis points of tightening this year, with benchmark interest rates expected to peak at 5.40% in November. That implies that the market sees a small chance of further rate hikes after the Fed concludes a two-day meeting on July 26.
The dollar index fell by 0.002%, the euro rose by 0.02% to $1.1229.
US government bond yields fell sharply last week as declining consumer and producer price inflation in June raised expectations that price pressures will continue to moderate and lead to looser monetary policy.
Two-year government bond yields, which typically move in line with interest rate expectations, rose 1.5 basis points to 4.766%, while the benchmark 10-year bond rose 1.4 basis points to 3.834%.
The pound sterling reversed, falling 0.2% to $1.3089, ahead of UK inflation data this week, where a new high would increase the risk of further significant rate hikes.
“An increase in core CPI may prompt financial markets to price in even more tightening from the Bank of England and push GBP/USD up to resistance at $1.3328,” CBA analysts said in a note. .
Oil fell more than 1% on weaker-than-expected Chinese economic growth.
US crude fell 0.74% to $74.86 a barrel and Brent was down 0.81% at $79.22.
Reporting by Herbert Lash, additional reporting by Karen Brettell in New York, Amanda Cooper in London, Wayne Cole in Sydney; Edited by Lincoln Feast, Christina Fincher and Barbara Lewis
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