US GDP data, China bank results, Air France strike

Here are the top stories we’ll be watching this week. 

Data will be out on the US economy, giving more clues about where Fed policy is heading. Air France-KLM faces a threat of more strikes hitting the airline. The level of bad loans will be a key focus when China’s banks reveal second quarter results. And China also faces criticism from the Uncover racial discrimination. First to the US, where economists expect second quarter US growth to be revised slightly lower when data are released on Wednesday, down to 4% from an initial reading of 4. 1%. That would still mark, however, the fastest rate of growth in four years, fuelled by consumer spending and business investment. Following the initial GDP release in July, President Trump declared it an economic turnaround of historic importance. He has levelled criticism against the Fed for raising rates, and so the Central Bank should do more to help him boost the economy. Investors are now focused on the second half of the year, with some economists projecting 3% growth over the six-month period. It remains uncertain, also, if trade will prove a drag on the US economy. The FT’s News Editor Peter Spiegel has this analysis. Well sometimes these figures can be slightly misleading. Remember, the second quarter figures of 4. 1% that were the initial reading was gangbusters. I mean, when was the last time the US economy great a quarterly basis of over 4%, or any developed country economy for that matter these days. The problem is that there is this dark cloud of trade tensions hanging over the US economy that no one really can quantify. Thus far, it has not hit the market certainly, and we haven’t seen it impact GDP figures or any of the ancillary economic figures. But the Fed has very clearly signalled it is worried about the way the trade war will impact the US economy going forward. And they’re also concerned, they do not have the firepower anymore to fight it if it does force the US economy back into a slower growth area. Obviously, they’re moving towards normalising rates. But they’re not at that level yet that suddenly they can cut rates to an extent that it would help the US economy that is hit by a trade war. 

On Monday, Air France-KLM’s restive French unions are meeting to discuss whether to continue their strike campaign. 

More strikes would be an unwelcome start for newly announced Chief Executive Benjamin Smith, who takes up the job at the end of September. Air France’s unions have already taken industrial action on multiple occasions this year, costing $335 million euros in the first half. Their rejection of a payoff had lead to the previous chief executive’s resignation. The Dutch counterparts, meanwhile, though welcoming Mr Smith, are also considering strikes at KLM. Here’s our transport correspondent Josh Spiro. I think the chances of the union striking after Monday’s meeting are pretty high. They’ve done a lot so far, and nothing has stopped them. And it could be terrifically damaging to Air France-KLM because as a group, it’s not especially harmonious. KLM is supporting it with its profits, and Air France is actually losing money. So any more strikes are only going to make this a lot worse. The company has the French state behind its a big shareholder, which makes the unions always think there’ll be someone to bail them out. The problem is, the French state might decide not to. That’s risky for the unions because if they don’t, then the airline could easily be broken before the unions are. Turning now to China, its banks have, over the past 18 months, faced a clamp down from regulators, with rules to curb out-of-control lending and risky funding. This week, we’ll see clues about how this is affecting the sector when China’s four biggest commercial banks post second quarter earnings, including Agricultural Bank of China, where investors will want to see how the country’s third largest lender plans to tackle rising bad loans. 

China also faces the possibility of more criticism from UN human rights experts. 

This week, the UN Committee on the Elimination of Racial Discrimination concludes a month of meetings, where it has been examining reports in countries, including Bosnia, Cuba, and Montenegro. Concerning China, the committee says it has credible reports that the country has locked up more than one million Uighurs in internment centres in the North-western frontier region of Xinjiang. The FT’s James King has more. Uighurs are an ethnic minority in China. They’re mostly Sunni Muslim. And the United Nations’ report says that the reason that the Uighurs are being locked up is purely because they’re being treated as enemies of the state based on their ethnoreligious identity. The UN statement also said that Xinjiang is resembling massive internment camp. 
China, for its part, has rejected the UN criticism, saying that this is completely untrue. It did admit that some Uighurs have been moved into re-education camps, and this was simply to put them right after they’d been misled by religious extremists. What’s really interesting about this topic, though, is that at the moment, it ’sonly the United Nations which has made a criticism of China. As far as I’m aware, no other national government has made a criticism of China thus far.