Forex Market Commentaries - China Still Pulling Up Global Markets

China Pulls Global Markets Up By Its Boot Straps, Probably Made In China

Jan 17 • Market Commentaries • 1478 Views • No Comments

China’s city dwelling urban population has finally surpassed those living in the countryside for the first time in the nation’s more than 5,000 years of ‘recorded’ history. The number of people living in towns and cities increased by 21 million to 690.79 million at the end of 2011, according to the National Bureau of Statistics. The rural population fell by 14.56 million to 656.56 million…

China’s economy grew at its weakest pace for 2-1/2 years in the latest quarter. Fears still exist that it’s headed for a sharper slowdown over the coming months as export demand fades from the USA and Europe and their domestic housing market stalls.

However, their fourth-quarter year-on-year growth of 8.9 percent was stronger than the 8.7 percent that economists had predicted. Early trade in the Asian session was dominated by these marginally better-than-expected figures on Chinese growth, even if the 8.9 percent annual rise was the weakest in 2-1/2 years and down from 9.1 percent in the previous quarter.

The data gave a massive lift to China shares, the benchmark Shanghai Composite Index closing up 4.2 percent, its biggest single-day percentage gain since October 2009 and the highest closing level since December 9, 2011. Commodity prices, mining stocks and commodity-related currencies all railed, with the Australian and New Zealand dollars hitting their strongest levels against the U.S. dollar in 2-1/2 months.

This brighter picture for global economic growth countered concerns over Europe’s debt crisis on Tuesday, lifting shares and the euro. German data due this morning on consumer sentiment, the constant Greek default fear and Spain’s debt sale this morning will give an indication as to whether or not sentiment has altered course.

 

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Market Overview
The MSCI World Index climbed by 0.6 percent as of 8:30 a.m. in London, set for its highest close since Nov. 8. The Stoxx Europe 600 Index rose 0.7 percent, China’s Shanghai Composite Index jumped 4.2 percent. Standard & Poor’s 500 Index futures added 0.8 percent. The euro rose 0.7 percent against the dollar. Copper gained 1.8 percent.

The yen and dollar weakened versus most of their major counterparts after China’s gross domestic product expanded more than economists estimated, advances in Asian stocks reduced the appeal of haven currencies.

Australia’s dollar climbed versus 14 of its 16 major peers on prospects demand for commodities will be sustained in China, the country’s biggest export market. The yen retreated from its 11-year high versus the euro.

Market snapshot at 10:00 am GMT (UK time)

Asia/Pacific markets enjoyed a considerable rally in the early morning session due to the better than expected Chinese data. The Nikkei closed up 1.05%, the Hang Seng closed up 3.24%, the CSI closed up 4.9%. The ASX 200 closed up 1.65%.

Investor sentiment, as evidenced on European bourse indices, has been positive despite the downgrading of the EFSF by S&P yesterday. The STOXX 50 is up 1.82%, the FTSE is up 1.07%, the CAC is up 1.82% and the DAX is up 1.52%. ICE Brent crude is up $1.22 a barrel, Comex gold is up $33.6 an ounce. The SPX daily equity index future is up 0.94% suggesting s positive opening for the NY market.

Economic calendar data releases that may affect sentiment in the afternoon session

13:30 US – Empire State Manufacturing Index January

This is a survey of New York State manufacturing companies with 100 or more employees or annual sales of at least $5 million (about 250 companies). This relatively new survey is similar to the Philadelphia Fed’s business outlook survey. The results of the survey are published on the fifteenth of the month (or on the next business day).

Of the analysts surveyed by Bloomberg, the average consensus for the month stood at 11, compared to the previous figure of 9.53.

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