A sigh of relief for investors in Europe this morning as Chinese GDP comes in at 7.5% for the second quarter of 2013, in line with expectations. That being said, the figure does confirm that the country is facing a considerable slowdown with this being the second consecutive quarter of weak growth. The data shows that China’s economy is suffering from a slowdown in investment, damp retail sales and stalling exports. Policymakers in China appear to be comfortable with the slowing pace of growth, focusing on structural and banking reforms rather than embarking on stimulus measures to prop up the economy. It could be said today’s positive reaction to the GDP figures is mostly down to the country’s finmin last Friday saying that he expects growth to come in at 7%, preparing the market for a weak release. European basic resource stocks are comforted by the Chinese data, with metal prices picking up pace overnight. Gold is currently up 8 bucks. But enthusiasm to build gains could face pressure during the course of the European session given the lack of economic data to offer indices fresh direction. Moreover, worrying news out of the euro zone doesn’t help; Portugal’s political turmoil, calls for Spain’s PM to quit and Friday’s rating downgrade of France have the potential to temper the mood. Portugal’s borrowing costs surged on Friday after the Socialist party in the country opposed the government by seeking to ease the conditions of the current bailout programme. Spain’s PM Mariano Rajoy is facing renewed pressure to resign after a newspaper published text messages that link him to the party treasurer involved in secret payments. And, France had its rating cut to AA+ from AAA with a stable outlook from Fitch, a move that looks behind the curve but nevertheless highlights the precarious state of the euro zone economy. With little data out of the euro zone, the focus will be on US macro releases in the shape of retail sales, business inventories and the Empire State manufacturing report. Citigroup’s Q2 results will be in focus after JPMorgan and Wells Fargo’s headline beating figures released on Friday. ________________________________________ Ishaq Siddiqi Market Strategist
Posted on: Mon, 15 Jul 2013 07:26:50 +0000
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