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China is set to release its July trade data on Thursday, with economists predicting a 5% year-on-year increase in exports, resulting in a trade surplus of $103.4bn for the month.
The country’s trade surpluses are expected to continue growing, with Goldman Sachs forecasting an annual surplus equivalent to 4.9% of GDP in 2025, up from 4.1% in 2024.
Despite a decrease in exports to the US due to tariffs imposed by President Trump, China managed to record a trade surplus of $114.8bn in June, showcasing the adaptability of Chinese businesses in rerouting trade through global supply chains.
Although export growth has been strong, there are indications that it may start to slow down. Recent data on manufacturing sector PMIs showed a decline in export orders and weak domestic demand, raising concerns about the future momentum of exports.
Looking ahead, analysts warn of potential downside risks in the absence of additional policy stimulus, as new export orders show signs of weakening.
Anticipated Actions from Bank of England Rate Setters
Market indicators suggest a high probability of a quarter-point interest rate cut by the Bank of England on Thursday, potentially lowering the policy rate to 4%. The Monetary Policy Committee’s differing views on economic conditions make it challenging to predict the future trajectory of policy decisions.
The MPC is expected to maintain a cautious approach to rate cuts, considering concerns about the job market weakening and inflation overshooting targets. The recent uptick in UK inflation has also influenced market expectations for additional rate cuts beyond the upcoming one.
Despite some members expressing concerns about the tight monetary policy and external uncertainties, the prevailing economic conditions may warrant further rate adjustments in the future.
Prospects for US Stock Market
Weaker US jobs data and ongoing trade tensions have impacted stock market performance, with tech stocks experiencing both highs and lows. The potential for deeper interest rate cuts could benefit stocks, particularly in the tech sector, by boosting economic growth and cash flow valuations.
However, concerns about the trade war’s economic impact and high stock valuations pose challenges for investors. The tech sector’s positive earnings outlook, driven by advancements in AI, offers a ray of hope amidst economic uncertainties.
Analysts anticipate continued growth in global tech earnings, reflecting a positive outlook on AI’s structural growth. While economic headlines may influence market sentiment, the tech sector’s resilience and potential for innovation remain key factors to watch.