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China’s economy lost momentum in the second quarter, owing to a slowdown in export growth, weak domestic retail sales and a moribund property sector, adding to pressure on the authorities in Beijing to intervene and support growth, and sending shares across Asia and Europe lower.
Gross domestic product in the world’s second-largest economy expanded 0.8 per cent against the previous three months, which was stronger than the 0.5 per cent expected by economists but well down on the 2.2 per cent quarter-on-quarter expansion in the January-March period.
Year on year, the economy grew 6.3 per cent in the second quarter because of a low-base effect from last year, when large cities including Shanghai were locked down for an extended period.
European stocks followed Asian counterparts lower in morning trading. France’s Cac 40, which has a high exposure to the Chinese economy through its luxury goods sector, was the worst performing large market in Europe.
The disappointing data also weighed on oil prices. Brent crude, the international benchmark, fell 1.2 per cent to trade at $78.93 a barrel. The US West Texas Intermediate fell by the same margin to $74.52.
China’s economy performed strongly at the start of the year after the lifting of strict lockdown rules opened up international trade and boosted domestic consumption. But in recent months that momentum has slowed because of weak household and business confidence.
The slowdown has led to growing calls for the authorities in Beijing to intervene and stimulate the private sector as consumers put more of their earnings into savings.
“China’s recovery is going from bad to worse,” Harry Murphy Cruise, economist at Moody’s Analytics, said in a research note. “The pandemic hangover is plaguing China’s recovery.”
And here’s what else I’m keeping tabs on today:
Economic data: The Federal Reserve Bank of New York issues the Empire State Manufacturing Survey for July.
Monetary policy: G20 finance ministers and central bank governors begin two days of talks in Gandhinagar, India. The president of the European Central Bank Christine Lagarde will deliver pre-recorded remarks to the 9th ECB conference on central, eastern and south-eastern European countries.
Brazil-EU relations: President Luiz Inácio Lula da Silva travels to Europe to join a summit of the Community of Latin American and Caribbean States and the EU.
Japan: Financial markets are closed for the Marine Day public holiday.
Five more top stories
1. Moscow-installed authorities in Crimea have halted traffic on the bridge connecting the occupied peninsula to Russia after reports of an explosion that caused parts of it to collapse, killing two people early today. If confirmed, it would be the second attack on the bridge that was opened with great fanfare by Russian president Vladimir Putin in 2018.
2. Microsoft has moved closer to its $75bn purchase of Activision Blizzard after a deal with Sony to keep popular game Call of Duty on the Japanese company’s PlayStation console after the acquisition. Sony’s biggest complaint was that the merger would hurt competition by allowing Microsoft to make the game exclusive to its own Xbox platform.
3. Exclusive: A typo has misdirected millions of US military emails to Mali, exposing sensitive information such as diplomatic documents, tax returns, passwords and the travel details of top officers. Mistyping .MIL as .ML, the country identifier for Mali, has led to a steady flow of emails despite repeated warnings for more than a decade. Read the full story.
4. Climate change is driving ever more extreme weather events, scientists say, including changing rainfall patterns that caused fatal flooding in the US, South Korea, India and Japan over the past week and a heatwave in southern Europe. “What climate change is doing is supercharging weather events,” said Rachel Cleetus of the Union of Concerned Scientists. Read more.
5. More than two-thirds of Ron DeSantis’s donations have come from individuals who have maxed out their contributions and cannot donate again to his primary campaign. The latest campaign finance disclosures, made in filings to the Federal Election Commission and released over the weekend, are the latest sign of the Florida governor’s faltering campaign.
More than 16 months after Russia’s invasion, Ukraine’s urgent need for war supplies has laid Europe’s defence industry bare. While the war may have spurred policymakers and companies into action — with EU ministers agreeing an ambitious target to supply 1mn rounds of ammunition to Ukraine within a year — the reality is that production will take years to match the sudden jump in demand.
We’re also reading . . .
Chart of the day
For the number of female CEOs in the US and UK to increase, according to data analysed by the Financial Times, there must be a significant shift in recruitment practices. The common route to becoming boss is still overwhelmingly through finance and operational roles — areas dominated by men.
Take a break from the news
Everyone complains about tourists. But now, possibly for the first time ever, a few European cities have begun doing something about them. The brief experience of tourist-free tranquillity in these places during lockdown is helping inspire change. Simon Kuper asks if cities should fly in the face of capitalism, reverse decades of economic history and try to repel tourists.
Additional contributions by Tee Zhuo and Benjamin Wilhelm