Marketmind: Amid the fog, look out for China GDP this week

By Jamie McGeever

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever, financial markets columnist.

Asian markets on Monday look set to open on a cautious footing in the wake of Wall Street’s slide and oil’s surge on Friday, against a backdrop of escalating violence in the Middle East, and ahead of top-tier Chinese economic data later in the week.

In terms of the Asian economic calendar on Monday investors have Japanese industrial production, Indonesian trade and Indian wholesale price inflation figures on their plate, while on Thursday the central banks of South Korea and Indonesia deliver their latest policy decisions and outlooks.

But the most important day could be Wednesday when Chinese unemployment, industrial production, retail sales and business investment figures for September will be released, along with third-quarter GDP.

GDP is the biggie. Everyone knows the continent’s largest economy has not emerged from the COVID lockdown restrictions anywhere near as strongly as most observers had expected.

The property sector’s travails, threat of deflation, soaring youth unemployment, foreign outflows from Chinese stocks and bonds, and the exchange rate’s slide to a 16-year low are well documented. How much damage will all that do to China’s growth in Q3?

Economists polled by Reuters expect growth to rebound on a quarterly basis to 1.0% from 0.8% in the April-June period, but to slow on a year-on-year basis to 4.4% from 6.3% in Q2.

Many private sector forecasters in recent months have slashed their outlook for this year and next. The numbers on Wednesday will go a long way to determining whether Beijing’s official 2023 goal of around 5% GDP growth will be met.

On the political front, Russian President Vladimir Putin and Chinese President Xi Jinping meet this week. Putin will attend the Belt and Road Forum in Beijing on Oct. 17-18, his first trip outside the former Soviet Union since the International Criminal Court issued a warrant for him in March over the deportation of children from Ukraine.

On the market front there was a mixed performance last week, with sentiment dominated by twists and turns in U.S. Treasuries and Fed rate expectations against the backdrop of tension and uncertainty surrounding events in the Middle East.

The week ended with Asian stocks up 6%, their first rise in four weeks, and world stocks adding 4.5%, their best week in six. Stocks got a boost from the broad decline in U.S. bond yields across the curve.

The move was most dramatic at the long end – the 30-year yield fell more than 15 basis points, its biggest weekly fall since March. But that followed five consecutive weekly increases and an accumulated rise of around 65 basis points.

Oil, meanwhile, jumped nearly 6% on Friday, its biggest rise since early March, and the dollar strengthened again, chalking up its 12th rise in the last 13 weeks.

Here are key developments that could provide more direction to markets on Monday:

– Japan industrial production (August)

– Indonesia trade (September)

– India wholesale inflation (September)

(By Jamie McGeever; Editing by Diane Craft)