Stocks pull back as Chinese growth slows

After a strong day of gains on Friday, the new week has seen a little bit of a pullback in most equity markets with the Eurostoxx and US stock futures both trading lower after the latest GDP figures for China showed the world’s second largest economy is growing at its slowest pace in almost 30 years. The FTSE is outperforming, and higher by around 10 points on the day, with the benchmark once more trading back near the key psychological 7000 level. The pound is pretty mixed on the whole although it has dipped back near the $1.28 handle in recent trade, after an attempt to move above the $1.30 mark on Friday was met with a pretty firm rebuttal.    

 

China’s economy expands at slowest pace since 1990

The broader declines in equities can be attributed to some data out overnight from the Far East which confirmed, what many have believed for some time, in that the Chinese economy is slowing. The trade war with the US and policy decisions in Beijing have dampened both consumer and business sentiment which has in turn caused growth for 2018 to fall to 6.6% - down from 6.8% in the previous year. It is worth pointing out that this pace of growth still represents a fair clip and while the pace in the 4th quarter did drop to its lowest level since the global financial crisis (6.4%) it is still comfortably above many of its Western peers - if the official data is taken to be accurate, something which is far from a given.

 

Industrial production figures beat

One bright spot was a better than expected industrial production figure, which rose to 5.7% year-on-year from 5.4% last time out and against consensus forecasts of 5.3%. Overall, the data doesn’t really raise any major red flags and while the pace of growth is clearly slowing, it seems to be declining in a relatively smooth manner and with the Chinese central bank adopting an increasingly accommodative stance, fears of a hard landing seem to overblown, at least for the time being. It’s worth noting that Chinese stock managed to eke out a small day of gains after the data, and while some of this could be attributed to the markets playing catch-up to the rally seen in other stock markets on Friday, it does suggest that investors have taken the news in their stride.
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