Take Two: Middle East conflict risks inflation spike; China growth beats expectations
- 23 October 2023 (3 min read)
What do you need to know?
The conflict between Israel and Palestine continued with the cancellation of a planned summit between US President Joe Biden and Middle East leaders dampening hopes of a swift resolution. However, credit rating agency S&P warned the global economy risks a renewed inflation shock if the conflict were to escalate. So far, the market reaction and spillover to the global economy remains limited with modest gold and oil price gains, but scant obvious safe-haven support for bonds. Over the week to Thursday’s close, global shares were down 2.06%.1
Around the world
Eurozone annual inflation was confirmed at 4.3% in September with prices rising at a slower pace than the previous month’s 5.2%. Core inflation, which excludes energy, food, alcohol and tobacco, eased to 4.5% from 5.3%, in line with the initial estimate. Elsewhere, UK annual inflation unexpectedly held steady at 6.7%, above the forecasted decrease to 6.6%, as increasing fuel costs offset the first monthly fall in food prices for two years. In Japan, core inflation rose 2.8% in September from a year earlier, down from 3.1% in August and representing a 13-month low.
Figure in focus: 4.9%
China’s economic growth exceeded expectations in the third quarter (Q3) on the back of increased consumption and industrial activity. GDP expanded at a quarterly rate of 1.3%, more than expected although a downward revised Q2 (to 0.5%) explained some of that. Retail sales and industrial output both increased more than expected in September, by an annual 5.5% and 4.5% respectively - likely benefiting from recent economic stimulus by China’s government. However, problems in its property sector and other headwinds continue to pose risks to the world’s second largest economy.
Words of wisdom
Deep ultraviolet lithography: The US tightened restrictions on the export of advanced semiconductor chips and chipmaking tools to China, including some deep ultraviolet (DUV) lithography systems. Used in precision manufacturing to print circuits on tiny chips, its more advanced equivalent - extreme ultraviolet equipment - is already being withheld from China. The new ban, aimed at limiting China’s access to advanced technologies that could have military applications, also expands licensing requirements for exports of advanced chips to more than 40 additional countries.
What’s coming up?
Flash October Purchasing Managers’ Indices for the Eurozone, UK, Japan and the US are published on Tuesday, as is the UK’s unemployment rate for August. On Wednesday, Germany releases its latest Ifo Business Climate index, a closely-watched indicator of the country’s economic health. The Bank of Canada meets to set interest rates on Wednesday, while the European Central Bank (ECB) convenes on Thursday - at its September meeting, the ECB raised its benchmark rate to a record 4%. The US publishes its first estimate of Q3 GDP growth on Thursday. France publishes an advance estimate of Q3 GDP growth on Friday.
- TVNDSSBXb3JsZCBOUiBJbmRleCBpbiBVUyBkb2xsYXIgdGVybXMuIFNvdXJjZTogRmFjdFNldCwgYXMgb2YgMTkgT2N0b2JlciAyMDIz
Disclaimer
This website is published by AXA Investment Managers Asia (Singapore) Ltd. (Registration No. 199001714W) for general circulation and informational purposes only. It does not constitute investment research or financial analysis relating to transactions in financial instruments, nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities. It has been prepared without taking into account the specific personal circumstances, investment objectives, financial situation or particular needs of any particular person and may be subject to change without notice. Please consult your financial or other professional advisers before making any investment decision.
Due to its simplification, this publication is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this publication is provided based on our state of knowledge at the time of creation of this publication. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.
All investment involves risk, including the loss of capital. The value of investments and the income from them can fluctuate and investors may not get back the amount originally invested. Past performance is not necessarily indicative of future performance.
Some of the Services and/or products may not be available for offer to retail investors.
This publication has not been reviewed by the Monetary Authority of Singapore.