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Long Lost Growth In China - By Jennifer Coombs

The major equity indices are in dire need of a catalyst in order to send stocks higher, but so far, to no avail. Markets began to slide lower following President Obama's speech at the G7 Summit where he noted that the US does not have a complete strategy for countering the Islamic State (ISIS) terror group. In recent weeks, ISIS has made territorial gains in Iraq and Syria, so this news was not very encouraging for the safety of the region. Additionally, Obama denies that he was complaining about the strong US dollar hurting the US economy at the summit meetings. Overall, the G7 summits never really help market optimism, and clearly, this time is no exception.

In the absence of any meaningful US economic data, we look to data out of China to move major world markets. In May, a bigger-than-expected slide in China's imports ended up strengthening expectations that more policy stimulus may be needed to avert a slowdown in the country's economy. While economists say that continued weakness in Chinese imports point to slacking in the economy, erratic global demand and a stronger yuan suggest that the government won't be able to hit its full-year growth target around 7.0%. For the month of May, exports fell by 2.5% in the country, which was much smaller than the 5.05 forecasted by economists, while imports declined by 17.6% versus an expected 10.7% decline. China posted a near record trade surplus of $59.5 billion in May, but weak imports ultimately are demonstrative of a slowdown in domestic consumption. So far, many of China's exporters have been struggling to cope with weaker overseas demand, increasing labor and currency costs, and large downward economic pressures. As such, many economists have lowered growth expectations for the second quarter well below 7.0%, which ultimately doesn't bode well for the likelihood of China achieving its full year growth target.