Hussein Sayed,
FXTM Chief Market Strategist
Investors hoping
for better-than-expected data from the world’s second largest economy were not
disappointed on Wednesday. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
China’s economy grew faster than
expected in the first three months of 2019, as stimulus measures began to
reflect in the country’s economic activity. GDP rose 6.4% in Q1, 0.1% above
market expectations, and matched growth levels posted in the final quarter of
2018.
Almost all data released from China
today managed to beat estimates, including industrial production and retail
sales in March, which jumped 8.5% and 8.7%, respectively.
The data released today shows strong
evidence that the slowdown experienced in the first two months of the year is
turning around, and government policies may remain loose to continue supporting
growth. However, a U.S. – China trade agreement is still needed to provide
further support to the private sector in order to keep driving growth higher.
The reaction in
equity markets was muted after the data release, probably because much of the
positivity has already been priced in. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html The CSI 300 Index has already risen by
35.5% in 2019 and the SSE Composite is up by 30.6%. In currency markets
however, the CNY touched its highest level since March 21 to trade at 6.69, and
the Australian Dollar broke above 0.72, a level last seen on February 21. Crude
also edged higher, touching its highest level so far this year, with Brent
trading above $72.
Shortages from the supply side
supported the rally in Oil prices in Q1, but today’s data suggests that
investors may also be concerned about the demand side of the equation. If
today’s improvement in Chinese data will translate into more demand from the
country’s refineries in April, and Iranian and Venezuelan output continues to
fall, prices are likely to edge higher, unless OPEC members decide to relax
production constraints.
The improvement in
risk sentiment has made Gold less appealing to investors. The precious metal
has come under significant pressure due to the equity market surge and a
stronger US Dollar. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html However, we expect limited downside
from current levels, especially if central banks continue to demonstrate a
strong appetite for buying Gold and
refrain from tightening monetary policy in the near future.
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