Today's Markets: China’s growth falls short of the target rate

China’s economy gained momentum in the last quarter, expanding by 3.9 per cent through July-Sept. The figure represented a positive beat on analyst forecasts, but it was still well adrift of the target rate. Growth remains constrained by periodic regional shutdowns and a stringent testing regime still in place to restrict the spread of Covid-19. 

China’s President, Xi Jinping, fresh from his reappointment as leader of the ruling Communist Party, has given no indication that the nation will alter its approach to dealing with Covid-19. The continuation of the “zero-Covid” strategy isn’t playing well with domestic markets, as evidenced by a multi-year low in the Hang Seng China Enterprises index. 

Asia Pacific analysts will have been frustrated by scant mention of the country’s ongoing property crisis at the Communist party’s 20th congress, but Chinese authorities are hardly synonymous with transparency and openness. Despite the lingering uncertainties, most Asian indices were in positive territory. 

After an initial slide, the FTSE 100 index recovered ground as the market digested the prospect of a Rishi Sunak premiership after Boris Johnson pulled his nomination on Sunday evening. Bond prices and sterling also responded positively. Sunak’s remaining rival Penny Mordaunt looks as if she might struggle to get the backing of 100 members needed to force a membership vote on the leadership. 

It might be something of a poisoned chalice anyway, at least judging by recent metrics (including flash PMI data) on the UK economy showing weakening demand in the manufacturing and services sectors, while inflation continues to depress discretionary spending in the economy. The one potential bright spot for industry is that wholesale gas prices continue to trend lower.