Lower-than-expected inflation dampens Chinese stock market sentiment

Market Summary

Last week, investors focused on the rise in US despite slow growth signals and Chinese stocks which were mixed due to softer inflation dampening investor sentiment.

In the United States, major benchmarks ended higher as investors considered slower economic growth and receding inflation. Stocks rose after CPI increased 0.1% (below expectations) with year-over-year rate of 5%, the slowest pace since May 2021. In Europe, stocks rose as recession fears receded. Eurozone industrial production for February rose 1.5% sequentially and 2.0% YoY, beating expectations. UK economy defies BoE recession forecast, as Feb GDP remained flat, and Jan expanded 0.4%. Even so, IMF predicts 0.3% shrink in 2023.

In Asia, Japan’s stock markets gained over the week. The yen weakened to around JPY 132.5 against the U.S. dollar, from about JPY 132.2 at the end of the previous week. The yield on the 10-year Japanese government bond was broadly unchanged at 0.46%, on anticipated ultra-easy monetary policy continuity under Ueda. Chinese stocks was mixed after a volatile week due to lower-than-anticipated inflation which dampened investor sentiment. China's inflation eases for 2nd straight month; CPI rose 0.7% YoY in March.

Major News

Russia intensifies bombardments in Donetsk and fights for strategic town of Bakhmut in Ukraine.

China simulates Taiwan blockade and strikes in military drills, citing response to Taiwan’s President meeting with US officials.

China introduces new rules for generative AI; firms need security reviews and must comply with socialist values.

IMF lowers world economic growth forecast to 2.8%, citing thickening fog and potential dangers from lower interest-rate increases.

What Caught Our Attention

Advanced AI tools like ChatGPT could make up to 300 million jobs redundant globally. The legal, financial, and insurance industries, as well as teachers, are most vulnerable. However, generative AI could boost global GDP by 7% in the next decade, according to Goldman Sachs.

There are concerns that the potential for automation may be overstated, as some human skills and qualities are essential for certain jobs. Many businesses may also lack the infrastructure or interest in accommodating AI innovations. There are also practical and legal challenges around the accuracy, privacy, and intellectual property of AI-generated content. However, AI could boost labor productivity and create new jobs.

Source: Kredens Capital, T. Rowe Price, Bloomberg, Financial Times, Wall Street Journal, The Economist, Nikkei Asia