Asian equity markets climbed higher on Chinese credit growth, which also saw three month LME copper and spot gold rally higher. Both the CSI 300 and Shanghai Composite closed higher for the second consecutive session, adding 0.7% and 0.92% respectively as record new credit in January assuaged fears that growth in China was losing momentum. According to figures released by the PBOC, aggregate financing rose to 2.58tn yuan in January from 1.23tn yuan the prior month. M2 money supply grew at 13.2% in January, in line with expectations, which further eased concerns of slowing growth. As a result, the seven day repo rate dropped below 4% for the first time since early January.
Japanese equity markets added modest gains despite Q4 GDP growing at a slower than forecast pace after adding 0.3% q/q. The annualised growth rate was well below forecasts of 2.8% coming in at 1% q/q and despite industrial production and capacity utilization both stable m/m the impending sales tax increase scheduled in April has put a dampener on consumer confidence. The BOJ are largely expected to leave policy unchanged at tomorrow’s meeting as rising inflation continues to put pressure on wages and household finances.
Spot gold prices rallied higher for a third consecutive session after taking a momentary pause last Wednesday as the yellow metal tested $1,300. Stronger demand owing to a weaker dollar index and poor US macroeconomic data led to a 1.1% increase on Friday, with total gains throughout February adding almost 7% as prices reach a 14 week high towards $1,330 this morning. Prices still have a long way to go if they are to recover last year’s sell-off which saw gold fall by 28% amid tapering speculation after twelve consecutive years of rising prices. For the coming session, a weaker dollar index, which drifted lower towards the end of last week towards 80.130, will offer short term support to gold prices.
US Market Holiday