FTSE dips on weak Chinese inflation

The FTSE rally has taken a pause in the Wednesday session. Currently, the index is trading at 7,369, down 0.37% on the day. On the release front, U.S. inflation numbers for May were soft. CPI slowed to 0.1%, down from 0.3% in the previous release. This matched the estimate. The core reading posted a gain of 0.1% for a fourth straight month, shy of the forecast of 0.2%.

European stock markets are in red territory on Wednesday, as there are further signs that the Chinese economy is feeling the effects of the trade war with the U.S. Chinese consumer inflation rose at an annualized rate of 2.7% in May, matching the forecast. However, producer price inflation slowed to 0.6% in May, down from 0.9% in April. As well, Chinese auto sales plunged 16.4% in May, its worst monthly decline on record. This marked an 11th successive decline and comes after a 14.6% drop in April. The soft numbers are reflective of the slowdown which has gripped the Chinese economy, and investors remain concerned, as the trade war with the U.S. shows no signs of easing.

There were fears that President Trump would slap Mexico with new tariffs, opening up another trade war front. The tariffs were set to take effect on Monday, but the U.S. suspended the tariffs, after talks between U.S. and Mexico helped defuse the latest crisis. Although the U.S. has said that the tariffs could be imposed if the illegal immigration crisis continues, investors are pleased that Trump has backtracked. There are also hopes that the bitter trade dispute between the U.S. and China will ease. At a G-20 meeting, finance ministers agreed on a joint communique to reduce trade tensions. There are hopes that progress towards a trade agreement will be made before President Trump and President Xi of China meet at the G-20 summit in Japan in late June. Risk appetite has improved, and the FTSE has gained 3.4% in June, recovering most of the losses seen in May.

Yuan steady as China inflation accelerates

European open – The end of the road

Economic Calendar

Wednesday (June 12)

  • 8:30 US CPI. Estimate 0.1%. Actual 0.1%
  • 8:30 US Core CPI. Estimate 0.2%. Actual 0.1%

*All release times are DST

*Key events are in bold

FTSE, Wendesday, June 12 at 11:15 DST

Previous Close: 7,375 Open: 7,396 High: 7,421 Low: 7,396 Close: 7,370