- Chinese GDP and industrial production disappoint.
- Equity markets and bond yields lower on soft data.
- China and U.S. to work together in North Korea crisis.
- EU extends loan to Ireland and Portugal.
- Focus today on U.S. Empire index and NAHB housing index.
Equity markets retreated Friday and the move has continued in Asia
following weak data in the U.S. and China and continued geopolitical risks on the Korean peninsula.
U.S. retail sales for March underpinned the expectation that the world’s largest economy is heading for a soft patch as consumers scale back on purchases following the tax hike on 1 January.
Chinese GDP rose a weaker-than-expected 7.7% y/y in Q1 (consensus 8.0% y/y) down from 7.9% y/y in Q4. Industrial production also disappointed rising 8.9% y/y in March, lower than the consensus estimate of 10.1%. Fixed asset investment and retail sales came in a notch weaker than expected as well. The new releases show that the Chinese economy failed to gain further momentum in Q1 following the improvement late last year. See Flash Comment - China: Weak Q1 GDP questions strength of recovery, 15 April 2013.
The U.S. secretary of State, John Kerry, has been touring Asia this weekend and is now opening up for direct dialogue with the Korean regime, either directly or through the ‘six-party’ format also including China, South Korea, Japan and Russia, see FT and Bloomberg. During the visit to Beijing China agreed to work together with the U.S. to end the North Korean nuclear pursuit. After a period of very tough rhetoric a more diplomatic tone is being struck in an attempt to start talks with North Korea.
In Europe EU finance ministers on Friday agreed to extend the average maturity of loans to Portugal and Ireland by seven years to facilitate a return to markets for the two countries over the coming year, see WSJ.
US bond yields fell steeply on Friday on the back of lower risk appetite and the outlook for a soft patch that is likely to push tapering of US asset purchases more into the future. The oil price has also retreated a lot recently and fell further this morning to below USD101 per barrel of Brent oil. This is the lowest level since July last year and will give support to consumers underpinning our expectation that the U.S. soft patch is likely to be short.
Markets will continue to focus on U.S. data this week with the first regional business surveys for April starting with the Empire index today and Philadelphia Fed survey on Thursday.
To Read the Entire Report Please Click on the pdf File Below.