The latest half-year economic report card for China has been released. The nation's GDP for the first half of the year reached 69.57 trillion yuan, representing a year-on-year increase of 4.7%. This growth comprised a 5% expansion in the first quarter and a 4.3% rise in the second quarter. The total retail sales of consumer goods and services grew by 2.7% year-on-year, while the value added of the service sector increased by 5.2% and the value added of industrial enterprises above a designated size rose by 5.4%.
Fixed asset investment in China for the first half of the year declined by 5.7% compared to the same period last year. Within this, investment in real estate development dropped by 18%, and sales area of newly built commercial housing decreased by 11.6%. By the end of June, the inventory area of commercial housing for sale was down 0.9% year-on-year, marking the fourth consecutive month of decline.
Data on housing prices in 70 major Chinese cities for June has been published. The number of cities where new home prices increased month-on-month rose to 20, up by 4 from the previous month. In the first-tier cities, the sales prices of new commercial residential buildings edged up 0.1% month-on-month, while prices for pre-owned homes increased by 0.3% month-on-month, both extending their rising trend for a fourth consecutive month. Prices in second- and third-tier cities either declined or remained flat on a monthly basis.
According to data from the Ministry of Housing and Urban-Rural Development, the total transaction volume for new and pre-owned homes in four first-tier cities and twelve key regional cities in June increased by 21.7% year-on-year. Nationwide, 207 cities reported positive year-on-year growth in the total transaction volume of new and pre-owned homes.
Overseas, former US President Donald Trump convened an emergency meeting to discuss plans for a large-scale offensive against Iran, with the core agenda being a new plan for devastating strikes on Iran's strategic targets. Sources indicated that Trump appeared willing to escalate the conflict to inflict sufficient damage to compel Iran to open the Strait of Hormuz and accept his demands regarding nuclear issues.
Iran's Deputy Foreign Minister, Gharibabadi, stated that Iran has never left the negotiating table and that it was the US that tore up the memorandum of understanding. He asserted that Iran would absolutely not be the first to bow and request negotiations with the United States.
The US Producer Price Index for June rose 5.5% year-on-year, significantly below the market expectation of 6.2%. The core PPI increased by 4.7% year-on-year, also well below the anticipated 5.2%. A sharp decline in oil prices was a primary factor behind the larger-than-expected cooling in PPI, although upstream cost pressures remained pronounced, with prices for processed goods, raw materials, and metals maintaining significant increases.
The Federal Reserve's Beige Book indicated that overall prices were rising at a modest pace. Prices increased moderately in nine districts, rose significantly in two districts, and saw a slight increase in one district. Compared to the previous reporting period, price increases were either unchanged or had slowed in all districts. Surveyed businesses generally anticipated continued economic expansion in the coming months, but several districts noted high uncertainty regarding the outlook for fuel costs.
New York Fed President John Williams remarked that, despite upward pressure on inflation from AI-driven demand, the current monetary policy stance remains in a good position to bring inflation back to the 2% target. He cited encouraging reasons to believe that inflation has peaked and should gradually decline over the next few quarters.
International Market Performance
The three major US stock indices closed slightly higher. The Dow Jones Industrial Average gained 0.29%, the S&P 500 index rose 0.38%, and the Nasdaq Composite increased by 0.62%. In Europe, the three major indices closed mixed. Germany's DAX 30 index fell 0.59%, France's CAC 40 index rose 0.19%, and the UK's FTSE 100 index declined 0.13%.
International oil prices generally closed higher. The main US crude oil futures contract rose 1.13%, while the main Brent crude oil futures contract gained 0.39%.
International precious metals futures mostly closed lower. COMEX gold futures declined 0.07%, and COMEX silver futures dropped 1.70%.
Most London Metal Exchange base metals closed lower. LME tin fell 1.90%, LME zinc declined 1.31%, and LME lead dropped 0.83%, while LME nickel edged up 0.39%.
US Treasury yields moved lower across the curve. The 2-year yield fell 6.72 basis points to 4.124%, the 3-year yield declined 7 basis points to 4.173%, the 5-year yield dropped 6.02 basis points to 4.257%, the 10-year yield decreased 4.61 basis points to 4.543%, and the 30-year yield fell 3 basis points to 5.076%.
The US Dollar Index declined 0.41% to 100.51. Non-US currencies generally appreciated. The euro rose 0.40% against the dollar to 1.1463, the British pound gained 1.11% to 1.3539, the US dollar fell 0.02% against the yen to 162.1935, the US dollar declined 0.13% against the Canadian dollar to 1.4042, and the US dollar dropped 0.47% against the Swiss franc to 0.8053. Offshore renminbi appreciated by 49 basis points against the US dollar to 6.7682.
In summary, following the CPI report, the larger-than-expected cooling of the US PPI for June, coupled with comments from New York Fed President Williams, has reinforced market optimism that US inflation has peaked. This has led to declines in the US dollar and Treasury yields. However, gold has still not managed to stage a significant rally. The core constraint lies in the fact that, although yields have declined slightly, the drop has been limited, and they remain at relatively high overall levels. This diminishes the appeal of non-yielding assets like gold. Until the Federal Reserve's policy shifts fully towards an easing stance, gold is expected to maintain a low-level consolidation pattern.
Key Risk Factors
Risks include changes in macroeconomic performance, shifts in monetary policy, and developments in geopolitical situations.
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