🇨🇳 China needs new customers

What’s going on here?

China's own shoppers still aren’t swiping the plastic, and according to the latest export figures, neither were the country’s international buyers.

What does this mean?

China’s exports were only 7% higher this July than last, missing economists’ 9.5% forecasts. Part of the blame lies with squeezed margins due to falling export prices, which have been on the slide since the middle of last year. And the outlook’s far from reassuring: former US president Trump is threatening to stamp tariffs of up to 60% on Chinese exports if he wins the election, when experts estimate that even a 10% increase could slow the inflation-adjusted economy’s growth down by up to 0.4 percentage points next year. That’s precisely the sort of trouble that China’s struggling economy – which grew at its slowest pace in five quarters from April to June – could do without.

Why should I care?

Zooming out: Rock, meet hard place.

Chinese exporters need to carve out some time to worry about the yuan, too. The currency has been strengthening against the dollar recently, a comeback from its slack performance earlier this year. That’s making the country’s products look more expensive internationally – and that could pose a problem for China’s many companies, from carmakers to ecommerce, that have recently pivoted toward global expansion to make up for limp demand at home.

The bigger picture: Counting sheep won’t cut it.

Mind you, stateside companies might also struggle to peacefully drift off at night. JPMorgan now says there’s a 35% chance that the US economy tips into a recession by the end of the year – up from 25% at the start of last month. And time won’t heal this wound: that probability reaches 45% for the second half of next year. Goldman Sachs has landed on a 25% probability of a recession in the next year, too – and in that case, the Federal Reserve could be forced to slash rates, stat.

What’s going on here?

US initial weekly jobless claims came in lower than usual, easing recession fears and giving stock markets reasons to be cheerful.

What does this mean

US weekly jobless claims are usually considered a pretty mute datapoint. But times aren’t “usual” right now – with panic and the big “recession” buzzword on everyone’s minds. Remember, one catalyst behind the recent stock sell-off was last Friday’s US jobs report coming in worse than expected, with unemployment landing higher than hoped. But Thursday’s data might take the edge off a little: the number of people claiming unemployment benefits in the US fell to 233,000 last week – better than the expected 240,000. And because that makes it more likely that the Federal Reserve (Fed) may tame inflation without tanking the economy, stateside stocks were given a lift after the news.

Why should I care?

Zooming out: A bit of boot quaking.

As the name suggests, the CNN Fear and Greed index indicates how greedy or fearful investors are feeling. And this week, the gauge hit the bright red “extreme fear” end. Much of that has been caused by the unwinding of the carry trade when a flock of investors rushed to sell stocks at the same time, sending markets down south – fast. But with JPMorgan saying that around 75% of these positions have been closed, the mass exodus may be close to running its course.

The bigger picture: Coming in smooth.

Not long ago, optimistic investors were eyeing up lower interest rates to support the economy and markets. But all it took was some disconcerting economic data for investors to abandon their stocks, concerned that the Fed had left it too late to cut interest rates. Although, today's batch offers some reassurance that the central bank has struck the balance, and could hold out on a trim until September as previously predicted.