Market Report: weaker economic outlook as China manufacturing growth stalls
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown: “The latest National Bureau of Statistics of China manufacturing purchasing managers’ index unexpectedly fell to 49.0 in July, from 50.2 in the previous month and missing market forecasts of 50.4. There was a very mixed bag hidden within the results, with core trends showing the negative effect of new lockdowns in key cities and general concerns over the global economy, following sharp monetary tightening efforts. Output, new orders, buying levels and export orders all shrank. This latest data set does very little to offset concerns around darkening global economic output, especially when put together with a further easing of sentiment.
These very concerns have fed into a drop in Brent Crude prices, now at around $103 per barrel. Questions over demand are outweighing serious supply constraints, suggesting industrial outlooks are bleak. The biggest contributor to this recent shift is without a doubt the news that factory activity in the world’s largest oil importer, China, has fallen unexpectedly. For the global consumer, this is likely to be met with relief as the cost to fill up cars recedes, but the broader theme of uncertainty sadly outweighs these short-term wins.
Pressure from HSBC’s largest shareholder, Ping An, to divide its Asian and western operations had led the banking giant to commit to restoring the dividend to pre-pandemic levels. The Asia-focussed operation has announced second quarter pre-tax profit of $5bn, beating analyst estimates of $3.9bn. Zooming out to the bigger first-half picture, and there are some warning signs. The group’s recognised a charge of over $1bn relating to expected credit losses and impairments as the economic outlook weakens. That’s more than undone the helping hand from rising interest rates on the bottom line. This gives activist shareholders even more clout to pressure the business to find new, potentially radical, ways to propel growth.”