- Chinese GDP growth accelerates for the first time in two years in Q4 12, boding well for growth in 2013.
- Strong U.S. housing data support U.S. sentiment.
- Economic adviser to Japanese PM says that USD/JPY at parity would be good for Japan.
This morning Chinese Q4 GDP numbers were released and the news was encouraging. Chinese growth accelerated for the first time since 2010. GDP rose 7.9%, slightly above the 7.8% consensus expectation and well above the 7.4% growth rate in Q3. The recovery was boosted by a jump in infrastructure spending by the government, showing that the government’s fiscal support package agreed on last year has in fact been able to revive the economy. Other Chinese data released this morning revealed that the recovery was strongest in December with accelerating growth in both retail sales and industrial production in December compared with November. That said, China recorded the slowest growth in 2012 for 12 years at 7.8% but the important issue here is that the economy ended the year on a stronger footing, which supports our view that growth will be significantly stronger this year.
The Chinese data have lifted Asian bourses this morning that are all in green. Nikkei is taking the lead after USD/JPY has traded above 90 once again. The latest move higher in USD/JPY was fuelled by comments by Hamada - an adviser to Prime Minster Abe - that USD/JPY at 100 would be good for the nation’s economy and only USD/JPY at 110 would be problematic.
Also from the US we got confirmation that the global stabilisation or in fact recovery is well under way. Housing starts climbed 12.1% in December last year, well above the consensus forecast and the strongest performance since June 2008. The housing market has indeed become a positive growth factor in the US. The weekly claims date were also encouraging, whereas Philly Fed survey dropped to -5.8, well below the 5.6 consensus forecast. The better US data and strong earnings from among others asset manager Blackrock pushed S&P to the highest level in five years. Financial shares declined in the S&P 500 after Citigroup reported a lower profit increase than expected.
In the FX market the rush out of safe havens, not least the Japanese yen but also the Swiss franc, continues and EUR/CHF has jumped to 1.2540 this morning. Other ‘new’ safe havens like GBP and DKK have also been under pressure recently. The move higher in EUR/DKK indicates that an independent Danish rate hike has moved closer. In the fixed income market we saw a significant sell-off in European core markets after reports that the ECB would tighten collateral rules and ahead of the LTRO repayment starting on 30 January. The negative bond sentiment was carried over to the US and Treasuries saw a new sell-off after the support seen the last couple of days.
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