A batch of Chinese and US economic data helped the global stocks nearing record highs on Friday. As investors priced in a solid global recovery from the covid-19 slump.
Markets were stable after China reported a sharp acceleration in first quarter growth. Thus, reading is slightly undershot expectations while retail sales bounced strongly last month.
Shanghai shares dipped 0.2% while the Chinese yuan eased.
According to an article in Reuters, the China data did little to change expectations of a strong recovery. Thus, further policy tightening to curb any excesses in property investments.
“Property investments were weaker but that’s no surprise given policy makers have been tightening loans to the sector while consumption is continuing a normalisation,” said Ei Kaku, Nomura senior strategist. “On the whole the data is unlikely to have a big impact.”
MSCI’s comprehensive index of Asia-Pacific shares outside Japan was off 0.2% while Japan’s Nikkei was almost flat.
Opinion of experts on US
“U.S. economic data released yesterday was all strong, confirming the U.S. economy is firmly on a recovery track,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
US retail sales bounced 9.8% in March, the highest increase since May 2020, in a gain that pushed the level of sales 17.1% above its pre-pandemic level to a record high.
Stressed data brightened the economy, including first-time claims for unemployment benefits tumbling last week to the lowest level since March 2020.
Effects on the U.S. and China Market
Despite strong data, US bond yields stumbled, in part driven by Japanese buying, as they began a new financial year this month.
The 10-year U.S. Treasuries yield fell 1.529%, a five-week low, on Thursday and last stood at 1.578%, off its 14-month high of 1.776% set at the end of March.
Chotaro Morita, chief fixed income strategist at SMBC Nikko Securities said “The market has already fully priced in an U.S. economic recovery in the near term. And if the Federal Reserve will keep interest rates on hold for the next two to three years, no doubt the carry of U.S. bonds would be very attractive compared with Japanese or euro zone bonds.”
The fall in the long-term bond yields profited stocks, and tech shares, given the idea that their historical valuations can be explained because investors would have no choice but to buy shares to make up for low returns from bonds.
S&P 500 advanced 1.11% while the tech-heavy Nasdaq Composite added 1.31%, nearing its record high set in February. In the currency market, lower U.S. yields were a drag on the U.S. dollar.
The euro at $1.1951 is having hit a six-week high of $1.19935 overnight while the U.S. currency dropped to a three-week low of 108.61 yen and last traded at 108.89.
Oil update with respect to the data on US and China
Oil prices held a stronghold after hitting a four-week highs on Thursday following positive U.S. economic data and higher demand forecasts from the International Energy Agency (IEA) and OPEC.
Brent futures consolidated at $66.89 per barrel, while U.S. crude was also little changed at $63.36 per barrel, both on course for their first substantial weekly gains in six.
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