China industrial profit growth slows to weakest pace this year
Industrial profits grew 4.2% year on year, the softest expansion this year, and economists expect Beijing to lean harder on stimulus.
By BBCorp
What happened
China reported industrial profit growth of 4.2% from a year earlier, the weakest expansion recorded this year.
Economists cited in the report expect Beijing to rely more heavily on stimulus to steady corporate profitability, as consolidation picks up in sectors dealing with sluggish demand and intense competition among producers.
Why it matters
China is a large consumer of industrial commodities, so signals about the health of its manufacturing sector are watched closely by markets that trade on global demand expectations, including crude oil and other raw materials.
Softer corporate earnings data also shifts attention to the policy response. Expectations of additional stimulus can influence risk appetite in equity indices, the dollar and currencies tied to commodity exports, while gold tends to draw attention both as a reserve and safe-haven asset and through the channel of shifting rate and growth expectations.
What to watch
The article points to possible further stimulus measures from Beijing aimed at supporting corporate profitability, and to continued consolidation in sectors facing weak demand. Subsequent industrial profit readings and official policy announcements are the next reference points mentioned.
Markets in play
- OilExposure: HighChinese industrial activity is a major input into global crude demand expectations.
- US stocksExposure: MediumGlobal equity sentiment reacts to Chinese growth signals and the scale of any policy response.
- GoldExposure: MediumGold is sensitive to shifts in global growth expectations and stimulus-driven changes in risk appetite.
Gold