The Hang Seng (-2.00%) and the Shanghai Composite (-4.50%) both traded lower on Thursday this week due to the unexpected drop in China’s retail sales. Retail sales printed at -1.8% vs +0.3% expected. Markets focused on this data as it has knocked investors confidence of the hopes for a fairly swift global economic recovery. You can see the print below:

Looking at the details of the print

Looking at the breakdown of the data shows a better picture than the headline print might otherwise indicate. Most sectors are actually showing growth. In fact only 6 of the 16 sectors that comprise the retail sales reading contracted during June. All of the other sectors put in a strong month. In fact some sectors even grew faster than for the same period in 2019.

Good reasons for falls?

Automobiles, which make up around 10% of all retail sales, fell from a one-off high level from last year. This was unlikely to be a sustainable metric at any rate. There are also suggestions that the petroleum and related products sector might have been impacted by adverse weather (torrential rains) in Southern China which resulted in construction projects being cancelled.

A market biased to the upside

With markets showing a bias to positivity then it should not be too hard to look through this retail sales data. There is not really enough to totally discount the hopes of an economic recovery. At least not on this data.

However, a rising concern today is the US COVID-19 cases. US COVID-19 cases rose by a record 68,428 in 24 hours according to the John Hopkins tracker. Texas cases increased by 10,291 to a total of 292,656 which was the 4th largest increase in record and deaths rose by 129 to 3,561 which was the largest single day increase. Once again we see the markets torn between hopes of economic recovery on the one hand and rising COVID-19 cases on the other.

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