Slowing economic growth in the United States

The data released this week showed that the economic growth of the United States slowed significantly in the third quarter, due to supply chain disruption, the resurgence of the COVID-19 epidemic, and slowing consumer spending. According to data released by the US Department of Commerce on Thursday, the world's largest economy grew at an annual rate of 2% in the three months to the end of September, the weakest quarterly growth since last year's recession caused by the pandemic. This growth rate is lower than economists' previous expectations of 2.7% and significantly slower than the 6.7% growth rate in the second quarter. In addition, sluggish consumption is a key factor leading to recent economic weakness, with consumer spending only increasing by 1.6%.

From mid March to early April, millions of American families received the federal government's stimulus fund cheque, which helped push up spending and promote economic growth in the spring. At that time, the number of COVID-19 cases in the United States began to decrease, and the states began to cancel anti epidemic restrictions. However, the more contagious Delta variant began to spread from the end of the second quarter, exerting a restraining effect on consumption and confidence throughout the summer.

Supply chain disruptions and shortages of almost all production factors from semiconductors to workers pose challenges to economic growth. These factors also contribute to rising inflation, which in turn erodes purchasing power and poses a risk to consumer spending and confidence. Meanwhile, the Consumer Price Index (CPI) in the United States rose 5.4% year-on-year in September, hovering near its highest level since 2008.

The stock market is unafraid of pressure and continues to hit new highs

However, the stock market seems to be indifferent to the disappointing US economic growth data, with the entire market focused on the positive earnings results announced by listed companies, resulting in the US stock market closing at record levels. The Nasdaq Composite Index, which is dominated by technology stocks, and the Standard&Poor's 500 Index, which is a blue chip stock, both closed at record highs this week. This week's strong corporate financial reports drove the stock market up, including earlier optimism about Apple and Amazon's financial reports. However, Amazon's revenue and revenue were lower than expected, and Apple's revenue was also lower than expected. This optimistic sentiment offset the impact of the above data.

At the same time, European stock markets were almost unaffected by the decision of the European Central Bank to slow down its bond buying program. The European 600 Index closed up 0.2%. Previously, the European Central Bank stated that its € 1.85 trillion epidemic emergency procurement plan would continue at a "slightly slower pace" than in the second and third quarters of this year, and chose to stabilize the eurozone benchmark interest rate at -0.5%. Therefore, the current dominant market is still dominated by various variants of the stagflation theme, namely the combination of rising inflation and slowing economic growth.

China Hong Kong stock market focuses on regulatory aspects

Let's take a look at the domestic market again. Recently, Chinese technology stocks have been rising, and since hitting a low in early October, stock indices tracking leading companies in the Chinese internet industry have achieved double-digit gains. The Nasdaq China Golden Dragon Index rose 18%, while the Hong Kong Hang Seng Technology Index jumped more than 13%. The market has become more optimistic and this week raised its outlook for Chinese stocks.

However, the possibility of further regulatory measures still hangs over the industry, leaving a significant gap between China's technology stocks and the broader Chinese market.

Due to the recent impact on the Chinese market and economic growth, the benchmark stock index, consisting of large stocks listed in Shanghai and Shenzhen, has fallen by about 5% this year, while large Chinese technology groups listed in Hong Kong and New York have fallen by more than 20%.

On Wednesday, the Federal Communications Commission of the United States voted to force China Telecom to shut down its US operations, which led to a 3.9% drop in Hong Kong listed technology stocks. Therefore, in the future, it is still necessary to pay attention to the regulatory authorities' further attitude towards the market, which determines the direction of future market development.

The above strategies only represent the opinions of analysts and are for reference only. They are not considered as a basis or invitation for any transaction and do not constitute investment advice for anyone. Doo Prime cannot guarantee the accuracy or completeness of this report, and is not responsible for any losses caused by the use of this report. You cannot rely on this report to replace your independent judgment. There are risks in the market, and investment needs to be cautious.

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