Robust Chinese data spread some optimism

Wednesday, July 16, 2014

Chinese economy expanded by 7.5% in the Q2 of 2014, beating analysts’ expectations of a 7.4% rise. The GDP report showed optimistic signs for an achievement of the Chinese government target of 7.5% growth for 2014. Retail sales also increased by 12.4% y/y in June in line with estimates, while industrial output surged by 9.2% y/y in June compared to 8.9% in May. The Hang Seng index posted modest gains ending 0.23% higher, while the Nikkei index consolidated around 15,380. The Australian dollar, which usually reacts positively after robust Chinese economic data, fell by 0.3% towards $0.93.      

China's GDP accelerated to 7.5% y/y

CNGDPYOY Index (China GDP Consta 2014-07-16 08-45-48

Strong corporate earnings results from Goldman Sachs, JP Morgan and Johnson & Johnson spread optimism in early trading across the US equity markets yesterday. However, markets reversed and gave back earlier gains after Fed’s Chair Janet Yellen gave a tepid reading on the US economy at the US Federal Reserve’s semi-annual monetary policy report to Congress. Yellen reported that “considerable uncertainty” of the current economic conditions could lead to a possible increase of interest rates earlier than expected, according to an article in Financial Times.   

Energy: Crude oil prices dropped by as much as $2 on Tuesday, showing their biggest slide this year as increasing crude oil supplies in Libya and modest US economic data raised continued concerns regarding the global market has been heading into a near-term glut. Brent front month futures retreated sharply and breached below $106 per barrel, while the WTI front month contract plunged and tested a low at $99 per barrel on Tuesday. This morning, solid Chinese economic data offered some support to the oil market.

Brent Front Month Futures

CO1 Comdty (Generic 1st 'CO' Fut 2014-07-16 08-45-02

WTI Front Month Contract

CLQ4 Comdty (WTI CRUDE FUTURE  A 2014-07-16 08-44-31

 

Today, the main focus will turn to the release of the UK ILO unemployment rate as well as US core PPI inflation figures and industrial output data fro June. The US NAHB housing market index could provide an insight about the current housing market conditions. The USD index has edged higher in early trading, climbing towards 80.5.

  

Events for today:

0300

CN

Jun

Retail Sales

0300

CN

Jun

Industrial Production

0300

CN

Q2

GDP

0930

UK

Jun

Claimant Count

0930

UK

Jun

ILO Unemployment

1330

US

Jun

PPI Final

1415

US

Jun

Industrial Output

1415

US

Jun

Capacity Utilisation

1500

US

Jul

NAHB Housing Market Prices

1530

US

w/e

EIA Energy Stocks

 

All times UK Local Time

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