Chinse Retail Sales Plumet as UK Unemployment Rises

China’s Retail Sales Plummet While Guangzhou’s Restrictions Ease

Retail sales have fallen across China for the first time in five months, following a continuation of strict lockdown measures and many Chinese households grappling with rising mortgage payments. This morning’s print indicates a 0.5% fall on an annualised basis, indicative of the pressures which the Chinese economy have faced over the last year.

Nevertheless, while these poor retail sales reflect the impact of China’s zero covid stance, there are signs that some municipal governments are somewhat easing restrictions despite rising cases. For example, Guangzhou, China’s southern manufacturing capital, announced last Friday that it would suspend a city-wide lockdown and opt instead for a areas to be closed off on a district-by-district basis.

This comes as many within the world’s second largest economy are greatly concerned about the extent to which the Politburo and Standing Committee’s strict rules (consolidated at the CCPs recent congress) are hindering growth and output. As such Guangzhou’s pivot may represent a turning point in China’s covid strategy, which could see an easing of investors and importers’ fears. 

Asian Equities Bounce on Xi and Biden’s Meeting

In the Asian equity markets, investors are rallying on Xi and Biden meeting yesterday, where the two leaders expressed a desire to build a better relationship. This helped to ease pre-existing concerns over what many view as a tempestuous relationship between Washington and Beijing. As such Hong Kong’s Hang Seng index rose 3.2%, while China’s CSI 300 ended the session 1.4% higher. Elsewhere the Japanese Topix index saw a more modest rise of 0.4%.

Autumn Statement Speculation Mounts

As speculation continues to mount on the content of Hunt’s much anticipated Autumn Statement, the next trickle of information has come from No.11. Regarding energy, Hunt is expected to raise the energy profits levy from 25% to 35% while also committing to extend it by a further two years to 2028. Meanwhile, a new tax of 40% is also expected to be imposed on the ‘excess returns’ from electricity generators.

It is thought that these two plans will raise some £45 over the next six years, though of course a vital caveat is that the amount generated will be heavily correlated with wholesale energy prices, which are (as we have seen) subject to meteoric swings.

These comes as No.11 is expected to extend the energy support package for some households and businesses, past the proposed March limit. Energy bills are also expected to rise an additional £900 for each household next year, bringing it to the best part of £3,000 as the £400 one-off support payment is expected to go.

CAC overtakes FTSE’s Market Cap

Yesterday, the CAC overtook the FTSE in terms of Market CAP following a rise in the value of the euro and French stocks. At the time of writing, FTSE listed shares totalled around $2.821 trillion while those on the CAC totalled $2.823 trillion. Areas including the French luxury goods sector have seen considerable growth with for example Louis Vuitton shares rising some 22% in the last two quarters. While equities have regained some of their lost ground, following a lower-than-expected inflation print in the US, the FTSE 100 has struggled over the last year with the index broadly in line with its y-t-d level and the FTSE 250 down around 17% over the past year.

Today in Focus

This morning has seen UK unemployment hit 3.6%, coming in some 0.1 percentage points above expectation. This is a slight rise from last months figure of 3.5% (which was close to all-time lows), and may just start to take some of the inflationary pressure off of the labour market. Today’s print comes just days after the Bank of England warned that unemployment could rise to 6.5% over the next few years as the UK economy enters its longest recession in a century. Markets will also be hotly anticipating Eurozone GDP figures for Q3, where quarter on quarter growth is predicted to come in at 0.2% (in line with last quarter’s print).