The majority of fundamental reports to excite investors today come out of East Asia. First off, Japan published its preliminary GDP data for the second quarter of 2021. The annualized growth came in at 1.3%, almost double the forecast, while quarterly growth was 0.3%, also better than investors expected. Industrial production grew in June as well.
China’s reports, on the other hand, were not that positive, though no major data was on the agenda for today. Asset investment, industrial production, and retail sales all failed to meet the forecasts for July, and the unemployment rate climbed from 5% to 5.1%.
This data is indicative of an economic slowdown in China over the past month, which can be explained by the country facing new Covid-19 outbreaks. The government is closing down public transportation such as trains, planes, and even ships in order to limit the spread of the coronavirus. These measures are likely to continue having a negative impact on the Chinese economy throughout August as well.
Speaking of the coronavirus pandemic, the global daily infection rate has been going up and reached a three-month peak last week. The biggest increases in the number of Covid-19 cases yesterday were in Iran, India, the United States, the United Kingdom, and Mexico.
In other political news, the conflict in Afghanistan is getting worse. Just weeks after US President Joe Biden announced that US troops will leave Afghanistan, the Taliban managed to gain control over the entire country, finally taking the capital Kabul again for the first time in over 20 years.
Western powers such as the United States and the United Kingdom have been evacuating their embassy staff and other citizens from Afghanistan over the past few days, which is causing much chaos in Kabul. People have been running towards planes and crowding around them, trying to force their way onto any flight out of the country in order to escape the Taliban regime.
The Taliban have not yet officially formed a government, after ousting President Ghani, but are expected to do so soon. They will most likely seek to impose Sharia, Muslim religious law.
There has not been a formal address by President Joe Biden yet as to whether the United States is going to engage in another full-blown war with the Taliban regime.
As for the stock market, today all major US indices will trade lower today due to the broad pessimism in the global economy. Moreover, there are rumors that the Federal Reserve is getting ready for a rapid unwinding of asset purchases that will start very soon. The Fed pulling stimulus out of the economy will hit stock indices.
