China exports weaker than expected in July

China’s export growth slowed to 7.0% y/y in July, down from 8.6% in June and below the median forecast. Exports have historically been a key driver of economic growth in China, and the softer reading is not positive for third quarter GDP, particularly as import growth accelerated by more than expected to 7.2% y/y from -2.3% in June. Weaker export growth may also indicate softer global demand; exports of aluminium and steel, automobile parts and machinery and lighting equipment all slowed on an annual basis last month. However shipments of high-tech products grew at a faster pace in July. Import growth was driven by oil and industrial metals.

Bahrain’s economy grew 3.3% y/y in Q1 2024, faster than the growth seen in the same quarter last year, but slower than in Q4 2023. The hydrocarbons sector GDP surprisingly grew 3.4% y/y in Q1 while non-oil growth slowed to 3.2% y/y from 4.9% y/y in Q4 2023. We expect non-oil growth to moderate to 2.7% in 2024 from 3.5% last year, before picking up again in 2025.

German industrial production rose by more than forecast in June, up 1.4% m/m while the annual rate improved to -4.1% y/y from -7.2% in May. As with factory output data released earlier this week, the main driver was increased autos and electrical equipment production.

Key Economic Data and events

08:30: RBI rate decision, forecast repo rate unchanged at 6.5%

16:30 US initial jobless claims (3 Aug) forecast 240k

16:30 US continuing claims (27 Jul) forecast 1871k

Fixed Income

• Weak demand for 10y treasuries auctioned on Wednesday pushed the yield up +5bp to 3.94% at yesterday’s close. The 2y yield was fell -2bp to 3.96%. Benchmark 10y bond yields rose across the board in Europe yesterday with French and German yields rising +6bp to 3.01% and +7bp to 2.27% respectively. 10y gilt yields rose +3bp to 3.95%.

FX

• The USD spot index rose 0.2% on Wednesday, fully reversing the decline on Monday. EUR and GBP recovered some ground against the dollar, as did the commodity currencies. JPY weakened to 147.2/USD, its lowest level since the start of the month, but is trading firmer this morning.

Equities

• US equities opened higher on Wednesday but gave up their gains through the session to close lower. Nasdaq100 declined -1.2% while the S&P500 lost -0.8% yesterday. European equity markets had a better day with the Eurostoxx50 up 2.0% and the FTSE100 gaining 1.8%.
• Regional equity markets also closed higher with the DFMGI up 1.5% and the ADXGI up 1.1% on Wednesday. The TASI rose 0.4%.

Commodities

• Brent and WTI both gained more than 2% on Wednesday with Brent closing at USD 78.33/b and WTI at USD 75.23/b. The move higher may reflect fears of an imminent reprisal from Iran against Israel. Official data on Wednesday showed that US crude stockpiles fell for the sixth consecutive week to their lowest level since February.