China's Q4 GDP beats expectations

Tuesday, January 20, 2015

China's GDP rose 7.3% y/y during the fourth quarter of 2014, faster than analyst expectations of 7.2%, as retail sales and industrial production data offered some signs of improvement, allowing policy makers in Beijing to breathe a sigh of relief as stimulus measures put in place last year began to have the desired effects. Industrial production in December accelerated 7.9% y/y against expectations of 7.4% y/y growth while retail sales increased 8.3% y/y the same month against expectations of a slightly lower 8.2% y/y increase. However, GDP growth in 2014 came to 7.4% y/y, the slowest rate of growth in over twenty years signalling policy makers still have much to do to ensure a soft landing. Both mainland benchmark indices and the yuan rallied on the data release with the Shanghai Composite and CSI 300 adding between 1.2-1.8% while the yuan traded around 6.2118 against the dollar before pulling back towards 6.2185. 

The IMF cut its global growth forecast significantly, cutting the outlook by the most in three years as it followed the World Bank's lead, which cut its own global forecasts last week. Despite a stronger dollar boosting prospects for the US and lower crude prices acting as a boon for global economic growth, the IMF cited prolonged below target inflation and a challenging demand outlook across Asia and Europe as key issues that needed to be addressed by central bankers and policy makers. Cutting its 2015 global growth forecast to 3.5% from the 3.8% outlook predicted in October the IMF stressed that global growth continued to face considerable headwinds with the only bright spot being the US which had its 2015 forecast upgraded from 3.1% to 3.6%.

The yen fell for a third session against the dollar on the better than expected Chinese data, trading above 118.50 as investors sought out higher yielding assets. Despite the encouraging moves out of the yen, investors are still approaching risk assets with caution ahead of this week’s ECB meeting, with participants expecting the central bank to initiate a further round of stimulus by buying up sovereign debt. The yen has managed to hold on to the majority of last week’s gains against the euro as investors continue to hold the single currency with caution amid capital flight to safer assets, particularly US treasuries which saw yields resume their decline as buyers flocked to safety. 10 year US treasury yields pulled back to 1.8% briefly this morning after rallying from 1.6966% to 1.8377% yesterday. Market volatility has spiked in recent weeks as investors rush to position themselves against an expected announcement of QE from the ECB later this week and as a result we anticipate broad swings in global equity benchmark indices in the run up with demand for U.S. treasuries potentially pushing yields lower.

China's Q4 GDP beats expectations

CNGDPYOY Index China GDP Consta 2015 01 20 07 21 37 

JPY weakens against USD as investors search for yield

JPY Curncy Japanese Yen Spot 2015 01 20 07 25 09

Events for today

0700

DE

Dec

PPI

1000

DE

Jan

ZEW Survey

1000

EZ

Jan

ZEW Survey

 

 

Topics: GDP, USD, China, EUR, JPY
More from: Kash Kamal