Drop in German trade activity feeds into global stimulus debate
German trade activity slowed abruptly in June, adding to signs that demand in leading economies may be starting to flag just as central banks consider scaling back years of stimulus. Exports from Europe’s biggest economy fell by 2.8 percent, the biggest drop since August 2015 and one that ended five straight months of growth. Imports sank by 4.5 percent, the biggest drop since January 2009, the Federal Statistics Office said. Exports and imports in China, which along with Europe has been driving an increasing share of global growth this year, grew much less than expected in July, data from Beijing showed earlier on Tuesday. Weaker import growth in the world’s second-largest economy could be the first tangible sign of a long-expected slowdown there. “We have to be cautious about the import outlook,” said Raymond Yeung, chief economist for Greater China at ANZ in Hong Kong, while noting that bad weather may have been a factor. The global growth equation has shifted with political ructions in Washington and beyond that have stymied stimulus policies being pushed by U.S. President Donald Trump.
China July exports, imports weaker than expected, cloud global outlook
China’s exports and imports grew much less than expected in July, raising concerns over whether global demand is starting to cool even as major Western central banks consider scaling back years of massive stimulus support. China and Europe have been driving an increasing share of global growth this year as political conflict stymies stimulus policies being pushed by U.S. President Donald Trump. But while China’s overall trade continued to grow at a healthy clip in July, at 8.8 percent it was the slowest rate this year. Some analysts chalked up the softer readings to seasonal or one-off factors, but others said weaker import growth could be the first tangible sign of a long-expected slowdown in the world’s second-largest economy after a surprisingly strong first half. “External demand is not really worrying in terms of the outlook,” said Raymond Yeung, chief economist for Greater China at ANZ in Hong Kong. “But we have to be cautious about the import outlook,” said Yeung, while noting that bad weather may have been a factor. China’s export growth slowed to 7.2 percent in July from a year earlier, the weakest pace since February and cooling from an 11.3 percent rise in June, official data showed on Tuesday. Analysts had expected a 10.9 percent gain.
Dollar slips back toward lows on Fed rate hike doubts
The dollar weakened again on Tuesday, but clung on to most of its gains from last week’s strong U.S. jobs data despite doubts that the Federal Reserve will hike rates again in 2017. The greenback had slumped to 15-month lows against its broad index .DXY last week after weak data bolstered the view that, having already increased interest rates twice this year, the Fed would now stay put until next year. But Friday’s bumper labour market data challenged that view, handing the dollar its best day so far this year. Since then it has slipped around half a percent and is less than 1 percent away from last week’s lows. “We’ve come to an interesting juncture with respect to the dollar because it’s been on the backfoot all year – it’s been the weakest-performing G10 currency – and we’ve come to a position where the market is now short,” Rabobank currency strategist Jane Foley in London said. “You can argue that a lot of the good news that was put into the dollar at the end of the year is now out of the price. Does that mean the dollar is now more sensitive to better news?” The dollar soared to 14-year highs at the start of 2017 on the so-called “Trumpflation trade”, with investors betting on pro-growth, inflation-boosting policies from the new president. But those bets have been unwound as doubts over Donald Trump’s ability to govern effectively have grown.