Australian shares are struggling to maintain their early morning rally, after China revealed that its economy had suffered a worse-than-expected slump in April.
- The ASX 200 has lost 4.6pc since the month began
- The Australian dollar tumbled to 68.8 US cents
- China’s jobless rate lifted to 6.1pc, its highest in since 2020
It was the result of China’s widening COVID-19 lockdowns, which are adding to fears its economy could shrink in the March quarter.
Given that China is Australia’s biggest trading partner, a slowdown could have a significant impact on the local economy.
The ASX 200 was up 0.2 per cent, to 7,090 points, by 2:05pm AEST.
The benchmark index had jumped by as much as 0.9 per cent on Monday morning before the disappointing Chinese economic data was released.
The Australian dollar slumped to its weakest level in around two years. It was buying 68.8 US cents, after a 0.9 per cent drop.
On oil markets, Brent crude futures tumbled to $US110 a barrel, after a 1.4 per cent slide.
Spot gold fell slightly to $US1,810 an ounce.
How bad was China’s economic data?
China’s retail sales plunged by 11.1 per cent in April — compared to a year ago — and this was its biggest slowdown since March 2020, according to figures from its National Bureau of Statistics.
The reading worsened from the 3.5 per cent fall in March, and was considerably worse than economists’ expectations of a 6.1 per cent drop).
Dining-out services were suspended in some provinces and China’s auto sales in April plunged 47.6 per cent from a year earlier as car makers slashed production amid empty showrooms and parts shortages.
As the anti-virus measures snarled supply chains and paralysed distribution, industrial production fell 2.9 per cent from a year earlier. This was the the largest decline since February 2020.
The shock also weighed on the job market, which Chinese leaders have prioritised for economic and social stability.
China’s nationwide survey-based jobless rate rose to 6.1 per cent in April — up from 5.8 per cent in March. It was the highest level of unemployment since February 2020.
The nation’s economy is headed for “a sharp contraction in economic activity”, said Julian Evans-Pritchard, an economist from Capital Economics.
“Provided that the virus situation continues to improve, the economy should begin to rebound this month. But the recovery is likely to be tepid.
Brambles receives buyout offer
Logistics firm Brambles was the best-performing stock on the ASX, after a 10.5 per cent jump.
This was after the pallets and container supplier said it was considering an unsolicited takeover offer from European private equity firm CVC Capital Partners, which is believed to be worth $20 billion, including debt.
If the deal goes through, it would be the biggest private equity takeover in the country.
The other top performers were Domino’s Pizza (+4.4 per cent), Qube Holdings (+4.9 per cent), Carsales (+4.4 per cent) and Pilbara Minerals (+4.1 per cent).
On the flip side, Imugene (-5.7pc), Magellan Financial (-3.4pc), Tyro Payments (-3.6pc), Sims (-2.3pc) and Spark New Zealand (-2.8pc) suffered heavy falls.
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