15.07.25 - Market Drivers: China growth - US inflation

China’s economy grew by 5.2% in Q2 2025, slightly above the 5.1% consensus forecast, but down from 5.4% in Q1. This signals continued but slowing growth momentum. However, retail sales grew only by 4.8% YoY (estimated 5.6%), down from 6.4% a month ago while industrial production topped forecasts growing 6.8% (estimated 5.6%), up from 5.8% a month earlier.

In the US, the June CPI report showed a modest rise in inflation. Headline CPI increased to 2.7% YoY (vs. 2.4% in May), just above expectations. Core CPI remained unchanged at 2.9%, matching forecasts.

Markets: Asian equities mixed this morning, European equities lagging, US futures positive while yields are unchanged and US dollar gains - cryptos and gold see some price drop.

My view: China’s beat is statistically welcome, but the deceleration in consumer growth highlights some existing fragilities. In case needed, the government will selectively add some stimulus to support a growth rate around the 5% target.

The rise in June inflation is not alarmingly, however could reinforce hopes that rate cuts remain on the horizon. In my view, Fed narrative remains “higher for longer” why markets may need to adjust overly dovish rate cut bets.

From a valuation and risk-return perspective, China currently looks more attractive than the US. While sentiment on China remains weak, it offers better upside potential with limited downside, particularly for patient, contrarian investors. Meanwhile, US equities appear priced for perfection, and are vulnerable to disappointment, especially if inflation stays sticky and rate cuts get delayed further.

Become a member to access more valuable market updates like this.