Signs of Chinese slowdown spook oil markets
Oil has fallen heavily since the Chinese data overnight (black verticals).
- Annualised retail sales missed the forecast of 5%, printing at 2.7%, lower than the previous 3.1%
- Annualised industrial production came in at 3.8 %, missing the forecast of 4.5% and lower than the last 3.9%.
- Fixed Asset investment was 5.7%. This was below the forecasted 6.3% and the previous print of 6.1%.
These misses have worried the market, as the world's second-largest economy shows signs of stalling growth. The Covid-19 lockdowns and precarious Chinese property market are likely culprits. In response, China's central bank surprised markets with a cut to key lending rates.
Given China's importance on the demand side of energy, the signs of a slowdown have rippled through to oil prices. USOil and UKOil's H4 stochastic have dropped below 20 (blue arrows). This area indicates strong selling momentum; if these levels are maintained, energy prices will fall even lower.
Russell Shor
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.
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