Weekly Fundamental Bulletin: All Eyes on China Q1 GDP

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Last Week’s Highlights

China’s Consumer Prices Drop to a 5-month Low

The latest consumer prices data from China released last week saw inflation easing to a five-month low in March. The declines were due to the COVID-19 outbreak which saw reduced household demand.

Data from the National Bureau of Statistics showed that headline inflation rose 4.3% on the year in March 2020. This was slower than the 5.2% increase in February.

Economists forecast that inflation would slip to 4.9% during the period ending March. Core inflation, excluding food and energy prices, grew at a rate of 1.2% in March, up from 1.0% in the previous month.

US Consumer Prices Slip Slightly in March

The monthly inflation report from the US saw consumer prices easing slightly lower in March. Data from the US Labor Department saw consumer prices falling by 0.4%. This was down from a 0.1% increase in February.

Inflation held steady for two months in January and February this year. Energy prices fell 5.8% in March, following a 2.0% decline in February.

This was the biggest decline in energy prices since January 2015. The core inflation rate was down by 0.1% in March, after rising 0.2% in the previous two months consecutively.

Eurogroup Finance Ministers Agree on a COVID-19 Rescue Package

The finance ministers of the Eurozone agreed in an emergency meeting to a rescue package. This comes amid the continent being hit hard by the pandemic.

Following the meeting last week, the Eurogroup agreed to a rescue package worth 240 trillion euros. This is about 2% of the Eurozone’s overall GDP.

The funds are expected to be transmitted through the European Stability Mechanism of ESM.

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Fed Announces a $2.3 Trillion Additional Liquidity

The Federal Reserve Bank last week announced an additional stimulus package worth $2.3 trillion in loans. The loans are aimed at assisting households and employers of all sizes.

The Federal Reserve said that the additional funds are a means of bolstering the Small Business Administration Paycheck protection program. Ever since the outbreak of the pandemic, the Federal Reserve launched a series of funding measures including the opening of currency swap lines to ensure USD liquidity in the global markets.

Upcoming Economic Events

China’s Trade Balance & Q1 GDP

As investors continue to assess the damage of COVID-19 in China, the original source of the outbreak, this week’s data will provide more insights. The trade balance data for March is forecast to rebound, rising 175 billion.

This comes right after a decline of 43 billion for January and February. The data comes ahead of Friday’s first-quarter GDP report. Forecasts show that China’s economic activity shrunk by 6.0%, reversing the 6.0% increase from the last quarter of 2019.

Bank of Canada to Keep Rates on Hold

The Bank of Canada will be holding its monetary policy meeting this week. According to economists, the BoC will be keeping rates unchanged.

Canada’s benchmark interest rate stands at 0.25%. The central bank is likely to maintain a cautious view of the economy amid the current global landscape.

This comes as Canada unleashed a $75 billion relief package to combat the pandemic. The BoC had earlier cut rates by 50 basis points in a coordinated central bank move.

Australian Unemployment Rate to Rise Slightly in March

The monthly labor market data for Australia is due on early Thursday. The median estimates show that the national unemployment rate will tick higher in March. As a result, the unemployment rate could rise from 5.1% previously to 5.4% in March.

The economy is also forecast to shed 30,000 jobs in March. This follows a 26.7k rise in employment during the previous month. A decline of 30k jobs would put this at the lowest level since December 2013.

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