Tuesday: China's Economy Slows in April

China’s April economic data revealed a pronounced slowdown, with industrial production, retail sales and fixed‑asset investment all missing forecasts. Investment fell 2.3% year‑on‑year—the steepest decline since February 2020—while retail sales barely rose 0.2%, the weakest post‑COVID rebound. The modest growth underscores a more cautious fiscal stance after a surprisingly strong Q1, and signals that policymakers are prioritising stability over headline GDP acceleration.

At the same time, an AI‑driven data‑center boom is offsetting China’s softness across the region. Singapore, South Korea and Taiwan reported double‑digit export growth, powered by soaring demand for semiconductors, AI servers and related hardware. US hyperscalers have pledged roughly $725 billion in capital expenditure for 2024, more than double last year’s spend, guaranteeing robust orders for Asian manufacturers. Thailand’s GDP accelerated to 2% in the March quarter, buoyed by a 9% rise in capital spending on data‑centre and EV projects, highlighting how export‑led growth is cushioning the broader Asian economy.

Beyond the trade narrative, the recent global bond market sell‑off is being driven by fiscal sustainability concerns rather than pure inflation worries. The United States faces a budget deficit exceeding 6% of GDP, with public debt projected to near 140% of GDP by 2030—higher than Italy or Greece. Across the G20, average sovereign debt sits around 90% of GDP, prompting investors to scrutinise fiscal trajectories. This fiscal pressure, combined with an uncertain FOMC leadership transition, is reviving “bond vigilante” sentiment, especially in markets where policy frameworks appear fragmented. Investors should monitor debt dynamics as they increasingly shape bond yields and risk premia worldwide.