In recent months, the ongoing "exit wave" on the back of China's faster-than-expected reopening has taken a heavy toll on economic activity due to surging infections, a temporary labour shortage and supply chain disruptions. Despite the continued weakness, and to everyone's surprise, China's economic activity broadly beat low market expectations. And even though this strong growth came mainly from food, economists think the message is clear as a bell, and China’s economy has likely already passed a turning point in Q4 and will strengthen from Q1 onwards.
On the other hand, investors view the beat as dashing hopes of PBoC rate cuts that would significantly enhance the growth outlook. Hence the all-things-China rally is losing a bit of steam
The China reopening is especially important. On the back of the latest GDP print, I expect upside estimates to H1 GDP growth, with the peak in nationwide covid cases likely behind us and high-frequency indicators of economic activity such as subway usage and domestic passenger flights picking up.
Expansionary property market policies and a return to consumption will be the engines of growth this year; crucially, the accumulation of household savings is massive and has risen fast over the past three years. Ultimately when Chinese consumers start spending, it will be a material boost to global growth, commodities, and Chinese stocks. It will also mark another positive development for the European growth outlook.
SPI Asset Management provides forex, commodities, and global indices analysis, in a timely and accurate fashion on major economic trends, technical analysis, and worldwide events that impact different asset classes and investors.
Our publications are for general information purposes only. It is not investment advice or a solicitation to buy or sell securities.
Opinions are the authors — not necessarily SPI Asset Management its officers or directors. Leveraged trading is high risk and not suitable for all. Losses can exceed investments.
Recommended Content
Editors’ Picks
EUR/USD drops below 1.0800 after German Retail Sales data
EUR/USD has come under fresh selling pressure and trades below 1.0800 after the data from Germany showed that Retail Sales declined by 1.9% MoM in February. Resurgent US Dollar demand is adding to the downside in the pair. US data are next in focus.
GBP/USD stays weak near 1.2600 amid market caution
GBP/USD remains defensive near 1.2600 in European trading on Thursday. The hawkish tone from Fed Governor Christopher Waller keeps the US Dollar afloat amid a cautious trading environment ahead of key US data releases and the Good Friday trading lull.
Gold price holds strength ahead of US core PCE inflation
Gold price holds onto gains near $2,200 in Thursday’s European session. The precious metal exhibits firm footing ahead of the United States core PCE Price Index data for February, which will be published on Friday.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.