Global shares dip after China data

LONDON, (Reuters) – Global shares and commodities slipped on Monday after data showed the Chinese economy is growing more slowly than expected, while the dollar eased as traders ramped up their bets for an imminent end to U.S. rate rises.

China reported economic growth of 0.8% in the second quarter, above the 0.5% forecast, while the annual pace slowed more than expected to 6.3%, well below expectations for a reading of 7.3%.

Last week brought a broad sweep out of the dollar and into risk assets such as equities and emerging market currencies, as well as into bonds, after a cooler reading of U.S. consumer inflation was enough to convince investors that the Federal Reserve could deliver the final rate hike of its monetary policy cycle this month.

The dollar, which fell 0.1% against a basket of major currencies on Monday, staged its biggest weekly fall of 2023 last week, dropping 2.3%, as traders rushed to price out the chance of a September rate rise.

This week’s data macro calendar is light and Fed officials are in their “blackout period” ahead of their July policy meeting, leaving investors with the big question of whether last week’s market moves will continue or reverse.

“I just can’t help but think we have gone a little bit too far too fast … one cooler inflation number doesn’t exactly mean the Fed are done and dusted and not going to hike again,” TraderX strategist Michael Brown said.

“Obviously, they’re going to hike next week, but after that, markets pretty much think they’re going to be done, and are starting to price in cuts for the first half of next year, which to my mind, is too aggressive,” he said.

“Given that we don’t have a lot on the calendar this week, the path of least resistance is lower for the dollar in the near term,” Brown added.

Global equities .MIWD00000PUS, which last week posted their strongest weekly rally since March, edged down 0.1% on Monday, under pressure from a decline in Europe, where weakness in China-sensitive shares like miners knocked 0.3% off the STOXX 600 .STOXX.

U.S. stock index futures ESc, NQc1 erased earlier gains and were down 0.1% ahead of a packed week of corporate earnings.

Tesla is the first of the big tech names to report this week, along with Bank of America, Morgan Stanley, Goldman Sachs and Netflix.

Data on U.S. retail sales are expected to show a rise of 0.3% ex-autos, continuing the slower trend but solid enough to fit into the market’s favoured soft-landing theme.

“We continue to look for a modest contraction to take hold toward the end of the year, but the path to a non-recessionary disinflation is starting to look more plausible,” said Michael Feroli, an economist at JPMorgan.

“We expect Fed officials cheered the latest inflation developments, but declaring victory with sub-4% unemployment, and over 4% core inflation, would be reckless.”