China’s economy slumps from COVID-19 lockdowns, ASX surges as Brambles eyes $20bn takeover bid

Australian stocks closed higher after a mixed day of trading after China revealed its economy suffered a worse-than-expected recession in April.

That’s the result of China’s widening COVID-19 lockdowns, which add to fears that its economy could shrink in the June quarter.

As China is Australia’s largest trading partner, a slowdown could have a significant impact on the local economy.

The ASX 200 closed 0.2% higher at 7,094 after hitting a high of 7,149 around 11 a.m. AEST before the release of disappointing economic data from China.

The Australian dollar fell to its weakest level in about two years. It bought 68.82 US cents and fell 0.8%.

In oil markets, Brent crude futures fell 1.7% and were worth $109.78 a barrel, as of 4:15 p.m. AEST.

Spot gold fell slightly to US$1,804 an ounce.

How bad was China’s economic data?

Retail sales in China fell 11.1% in April – from a year ago – and it was its biggest slowdown since March 2020, according to figures from its National Bureau of Statistics.

The reading deteriorated from the 3.5% drop in March and was considerably worse than economists’ expectations of a 6.1% drop.

Catering services were suspended in some provinces and auto sales in China in April fell 47.6% from a year earlier as automakers cut production due to empty showrooms. and parts shortages.

As anti-virus measures blocked supply chains and paralyzed distribution, industrial production fell 2.9% from a year earlier. This is the biggest drop since February 2020.

The shock also weighed on the labor market, which Chinese leaders have prioritized for economic and social stability.

China’s survey-based national unemployment rate rose to 6.1% in April from 5.8% in March. This is the highest unemployment rate since February 2020.

The country’s economy is headed for “a sharp contraction in economic activity,” said Julian Evans-Pritchard, an economist at Capital Economics.

“Provided the virus situation continues to improve, the economy should begin to rebound this month. But the recovery is likely to be tepid.

Brambles receives takeover offer

Logistics company Brambles was the ASX’s best performing stock, after a 10.9% jump.

This was after the pallet and container supplier said it was considering an unsolicited takeover bid from European private equity firm CVC Capital Partners, which is believed to be worth $20 billion, in debt understood.

If the deal goes ahead, it would be the biggest private equity takeover in the country.

Other top performers were Pilbara Minerals (+5.4%), Qube Holdings (+5.3%), Life360 (+4.8%) and Xero Limited (+4.5%).

On the other hand, Imugene lost 5.7%, Polynovo Limited fell 4.2%, followed by Zip Co Limited (-3.5%), Magellan Financial (-3.2%) and Tyro Payments ( -3.1%).

ABC/Reuters