China factories limp along, Japan inflation goes backwards

Thu Sep 29, 2016 11:45pm EDT
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By Wayne Cole

SYDNEY (Reuters) - China's factory sector struggled to gain speed in September while Japanese inflation went backwards in August despite the best efforts of policymakers, underscoring the limits of stimulus in reviving world growth.

Friday's unflattering figures bookmarked a week in which the IMF warned it would likely downgrade forecasts for the U.S. economy, and the World Trade Organization slashed its outlook for global trade flows.

That was unwelcome news for markets spooked by troubles at Deutsche Bank, whose U.S. shares took a hammering on reports some hedge funds had reduced financial exposure to Germany's largest lender.

The bank said the "vast majority" of its clients remained supportive, but the situation still drew comparisons to the 2008 failure of Lehman and the resulting global financial crisis.

There was at least some evidence that China, the world's second largest economy, had stabilized, if only because of a burst of government spending and a red-hot housing market.

The Caixin measure of manufacturing activity (PMI) edged up a tenth of a percentage point to 50.1, led by output and new orders. While the move was marginal, it was only the second time the index had reached positive territory since February 2015.

The U.S. economy also looked to have bounced back in the third quarter, while a string of data showed Europe weathered Britain's Brexit vote better than many had feared.

All of which encouraged Barclays to nudge up its 2017 call for global growth to 3.5 percent, from an expected 3.1 percent this year. Yet a true lift-off still seems remote.   Continued...

A worker cuts steel plates inside the China Steel Corporation factory, in Kaohsiung, southern Taiwan August 26, 2016. REUTERS/Tyrone Siu/File Photo