Investment Institute
Weekly Market Update

Take Two: China growth slows and population falls; global bond issuance soars

  • 23 January 2023 (3 min read)

What do you need to know?

China’s economy grew 2.9% in the fourth quarter (Q4), above market expectations but down from Q3’s 3.9%. That contributed to an annual growth rate of 3% in 2022, below the government’s 5.5% target and its second slowest pace since 1976 – reflecting the toll of China’s longstanding ‘zero-covid’ policy. But the world’s second largest economy is also facing several challenges, including an ageing society; new data showed its population contracted in 2022 for the first time in more than 60 years, a factor which will have significant implications for its labour market and domestic demand.

Around the world

Global bond issuance totalled $586bn between the start of the year and 18 January, a record amount for that period, according to Bloomberg. Easing inflation, combined with expectations that central banks will slow their aggressive monetary tightening, have likely improved sentiment among issuers and boosted investor appetite for debt. Euro-denominated debt issuance rose around 39% compared to the same period a year earlier, while dollar-denominated bond sales were roughly the same as last year, Bloomberg said.

Figure in focus: 1.1%

US retail sales fell 1.1% in December, down for the second month in a row and their biggest monthly drop in a year, while manufacturing production also dipped, by 1.3%. Both came in worse than expected and chime with anecdotal evidence from the Federal Reserve’s (Fed) ‘Beige Book’ which found high inflation was deterring spending among low-and middle-income households. Signs of economic fragility have encouraged hopes that the Fed might ease off on the pace and scale of rate hikes, but officials last week argued rates may still need to head above 5% to rein in inflation. The benchmark Fed Funds rate range currently sits at 4.25%-4.5%.

Words of wisdom:

Giving to Amplify Earth Action (GAEA): A global initiative launched by the World Economic Forum (WEF) to help deliver the $3trn of annual finance needed to tackle climate change and biodiversity loss. Launched at last week’s WEF annual meeting in Davos, the initiative intends to leverage financing from public and private sources to fund and develop philanthropic partnerships aimed to help deliver net zero targets, reverse nature loss and restore biodiversity by 2050. The annual meeting also featured discussions on the Ukraine war, recession concerns, COVID-19 resurgences, and cost of living pressures.

What’s coming up

Several Asia stock markets will be closed for some or all of the week to mark new year celebrations. The first estimate for Eurozone consumer confidence in January will land on Monday, while on Tuesday a series of flash Purchasing Managers’ Index (PMI) releases will arrive for Japan, the US, the UK and Eurozone. The Bank of Canada details its latest interest rate decision on Wednesday, followed by the Bank of Japan’s publication of its Summary of Opinions on Thursday. US fourth quarter GDP is reported on Thursday alongside a raft of other US data, including durable goods orders and new home sales.

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