Spreadex Market Update
US inflation edges out of negative territory; focus turns to Chinese GDP/industrial production figures on Friday morning
It was tricky to ascertain investors’ reaction to the CPI reading; initially both the pound and the Dow rose, suggesting the market was happy with the ostensibly hawk-damaging nature of inflation’s relative softness. Yet at the same time the reading is now back out of negative territory, something that may cause a slightly less cautious tone to creep in during the Fed’s statement at the end of the month, explaining why those gains disappeared as the afternoon wore on.
Returning to (an admittedly classier kind of) flatness the FTSE couldn’t really budge from the 6350 mark this Thursday, dragged down by a beleaguered Burberry, an investor-revolting BP and a generally soft mining sector. Things could change tomorrow, however. Not because of anything from the UK (the index finding it almost impossible at the moment to generate some home grown momentum); no, Friday morning sees the Chinese Q1 GDP, industrial production and fixed asset investment figures, and if Wednesday’s exports-inspired growth is anything to go by there is the potential for a pretty big reaction from the markets.
Investors will be looking for more signs that the Chinese economy is beginning to pick up; the chances of them actually receiving said signs looks mixed. The headline GDP figure is forecast to fall to 6.7% from 6.8% year-on-year (and quarter-on-quarter), its lowest level in 7 years. Industrial production, however, is expected to edge up to 5.9% from last month’s 5.4%, with fixed asset investment forecast to hit a 6 month high of 10.4%. It remains to be seen whether those figures, if accurate, can get investors hot under the collar like they did on Wednesday; if they can then fresh 2016 highs may be on their way.
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