This is another bad signal China is sending to the global economy. The great Asian power, where consumption is stifled by a serious real estate crisis, has officially fallen into deflation, the opposite of inflation. There, the consumer price index, stable in June, contracted 0.3% year on year last month, according to figures released this morning by the National Bureau of Statistics, while the producer price index continued to decline (-4.4% over one year), marking a tenth month of affiliate decline. Prices are falling, nice isn’t it? Absolutely not. This testifies to the weakness of demand which, without shock treatment, feeds itself.
Because if prices go down, consumers have an incentive to postpone their purchases (after all, why spend now when tomorrow will be less expensive?), which pushes companies to grant additional discounts to sell their products and thus be able to pay their bills. , the weakness of demand incites them to adjust the shooting and to cut in the production and the manpower, to reduce the wages (the price of the work). The spiral is destructive for the economy, especially since deflation increases the weight of the debt, a real problem in an indebted world like today. Inflation around 2%, and not stable, is considered healthy.
Obesity treatment rush
The CSI 300 composite index of the Shanghai and Shenzhen Stock Exchanges lost 0.38%. The MSCI Asia-Pacific fell 0.88%. There is a lack of appetite for risk, and therefore for equities, in an economic context that requires caution. Chinese foreign trade figures released yesterday, with double-digit declines for both imports and exports, reflect both weak consumption in China (imports) and overseas (exports), with the country considered like the factory of the world. We will note however, contrary to the trend today in Asia, the rush towards the actors of weight loss, in the wake of the frenzy which first affected Europe then the United States yesterday, while Danish laboratory Novo Nordisk published clinical results yesterday showing that its obesity drug, Wegovy, also reduced the risk of a major cardiovascular event, heart attack or stroke, by 20%. In China, Suzhou Highfine Biotech and Cheng Du ShengNuo Biotec, engaged in the development of a treatment similar to Wegovy, gained up to 20%, the maximum daily limit. Sinopep-Allsino Bio Pharmaceutical and Innovent Biologics grew more than 10% in Shanghai and Hong Kong, respectively. In Korea, Peptron jumped 30% to the day’s high.
Novo Nordisk, which will publish its quarterly accounts tomorrow, hit record highs yesterday on the Copenhagen Stock Exchange with a jump of 17%. Its capitalization is close to 400 billion euros and that of LVMH, the largest listed company in Europe, but which is currently bearing the brunt of the economic weakness of China, a large consumer of luxury goods.
Novo Nordisk is currently the 19th in the world capitalization (424 billion dollars and 382 billion euros) and the 2nd in Europe, behind LVMHBloomberg
However, although the luxury sector weighs for a quarter of the index, the Cac 40 is expected to rebound this morning, with future contracts pointing to an opening up 0.8% (+60 points). Yesterday, on Wall Street, the indices finished above the session lows. The S&P 500 closed down 0.42% after losing as much as 1.2% in the session, “partly as a result of a strong 3-year treasury bill auction”according to Jim Reid, strategist at Deutsche Bank.