Let?s take a look at two global economic updates or interesting key developments that happened last week that investors should take note of. First, we?ll look at a few positive signs as indication of China?s sustained growth. Next, we?ll move on to look at how the Eurozone recovery concerns have led to a sudden drop in the Eurodollar, affecting gold prices.
China Economy on Upswing
A non-manufacturing Purchasing Managers? Index rose to 51.4 as compared to 51.1 in September, the highest level this year. GDP is also set to increase…
Let’s take a look at two global economic updates or interesting key developments that happened last week that investors should take note of. First, we’ll look at a few positive signs as indication of China’s sustained growth. Next, we’ll move on to look at how the Eurozone recovery concerns have led to a sudden drop in the Eurodollar, affecting gold prices.
China Economy on Upswing
A non-manufacturing Purchasing Managers’ Index rose to 51.4 as compared to 51.1 in September, the highest level this year. GDP is also set to increase a moderate 7.6% this year, according to the median estimate of 52 economists surveyed by Bloomberg last month.
While the expansion is reason for cheer, the country is actually heading for its slowest growth since 1990. At the same time, there are various issues which need to be ironed out such as excessive credit growth, rising local-government debt and weaker export momentum.
Nevertheless, with the China economy being on an upswing, it may give the Chinese government more confidence in tackling reforms in the next Chinese Communist Party meeting on the following week.
President Xi Jinping and Premier Li Keqiang have indicated that the heydays of China are over. The government will focus on policy changes to support more sustainable growth that will reduce inequality and doesn’t damage the environment.
The economy is entering a phase of “transformation” involving a slowdown in growth “from a high speed to a medium to high speed,” Li said in September. The government are also shifting their focus of growth away from investment and exports to the up and coming industries like leisure, e-commerce and transport.
Singapore companies set to benefit from China’s implementation of reforms are leading developer and operator of tourism-related assets in China – Straco Corporation Limited (SGX: S85) and Midas Holdings (SGX: 5EN).
Downbeat Eurozone Data
Lacklustre Eurozone data points to a faltering economic recovery in the 17-nation bloc, overshadowing positive US factory activity data. Annual inflation rate slid to 0.7% in October, the least since November 2009, from 1.1% in September.
Unemployment in the Euro region also hovered at a record 12.2% in September and as many as 19.4 million people remained out of work across the eurozone.
As a result, the Euro fell the most (2.3%) in more than a year versus the dollar as investors predict that the European Central Bank will cut interest rates quickly at its meeting next week.
“A drop in the euro on the back of weaker inflation figures and very good U.S. data has strengthened the dollar, in turn weighing on gold and I wouldn’t be surprised to see a drop below $1,300 next week if there’s more good data out of the U.S,” Natixis analyst Bernard Dahdah told Reuters .
As many as 13 of 19 analysts polled by a Kitco Gold Survey said they expected gold prices to decrease. Shares of the gold exchange traded fund, SPDR GOLD SHARES (SGX: O87), have also been on a decline since 1 year ago.
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