Chinese GDP Data Surprised Investors

Chinese GDP Data Surprised Investors

Over on Wall Street, the string of record highs is not stimulating enough optimism for investors in Europe. After the horrific attacks in France, investors are anxious about the situation and how it will unfold. Most importantly, the question is what it means for the EU and for its single market with open borders given that the UK has chosen to leave the EU. Events like these can cause further division among nations which may create more turmoil and uncertainty for the markets. It is certainly time for unity and only a united front can cure these events.

The Chinese economy has shown signs of bottoming out, at least according to the latest economic data. The recent GDP data has come in at 6.7%, compared to the forecast of 6.6%. We can thank the continuous efforts by the PBOC, which introduced various different stimulus measures to achieve that figure. The number for the second quarter was 1.8% higher as compared to the first quarter. This also confirmed that the industrial production and retails sales data have also picked up steam on a year-on-year basis during the month of June.

China's biggest challenge was to shift its economy from manufacturing based to consumption based, and this raised many questions among market participants whether the country would be able to achieve this. A hard landing for the Chinese economy has been very much on the cards and investors have been questioning the slowdown. The Brexit vote may have an effect in the coming days, as we can see if there were any consequences as the export numbers took a hit.

Over in the US, one of the global measures which the Fed has been paying attention to, is the slowdown of the Chinese economy. An event which has prevented them from raising interest rates. The Fed will be a lot more comfortable in their decision making after looking at China’s data.

The Bank of England surprised the markets yesterday with their interest rate decision with many being caught off guard. The bank needs more convincing data before they can lower the rate. It was enough to push the sterling higher. However, it is quite important to keep in mind that the bank has said more easing is on cards and this could trigger a downward trend.

Traders have used this current opportunity to make a quick profit and it is by no means based on fundamentals. As long as you keep an eye on the ball, which in this case is a rate cut and the possibility of adding more stimulus, we could see this trade reversing in a matter of weeks.

ENDS

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