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Beverly Chandler

Asian stocks have mixed reaction to figures from China

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Aneeka Gupta, Associate – Research Analyst with ETF Securities writes that Asian stocks have opened the week on a mixed footing after a raft of economic data released from Beijing. 

The figures show that China managed to beat their third quarter GDP estimate by a fraction 0.1 per cent, although they lagged behind industrial production estimates by -0.3 per cent while retail sales remained a bright spot. Gupta writes: “European futures are indicating a lower open as they digest the pivotal data from China. This week central banks in Europe and Canada will decide on their interest rate policy with hopes pinned on further stimulus by Europe.”
 
In commodities, stronger US inflation data has taken the shine off gold, Gupta writes. “Softer economic data from US and China helped gold rise above its 200d moving average USD1176. However, Thursday’s release of higher-than-expected US core inflation of 1.9 per cent, came in just shy of Fed’s inflation target, pushed gold lower as investors revisited the prospect of a 2015 rate hike.”
 
The platinum price is recovering from overblown fears caused by the VW emissions scandal. “We see platinum attain its highest level in seven weeks while palladium’s price reaction remain muted despite a 9.8 per cent rise in new car registrations in Europe, marking the 25th consecutive month of growth.”
 
However, oil prices failed to show a clear price trend, declining in part due to profit taking from last week’s highs and a 7.6 million barrel increase in US crude oil reported by the US department of energy added to the supply glut.
 
In terms of equities, ETF Securities finds that tightening margins dominate the US’s third quarter earnings season. “China’s benchmark Shanghai composite index posted its best week in four months rising 6.54 per cent on renewed optimism of state reforms after the raft of weak economic data. Over in Europe stimulus bets are on the rise after a sharp deterioration in the German ZEW survey and Europe’s inflation data dipping into negative territory.”
 
Gupta finds that the US earnings season has been disappointing, with 27 per cent of companies that have reported showing negative QoQ earnings particularly in the energy, financials and materials sectors. Quarterly profit margins have fallen below 10 per cent for the first time since 2012 as a combination of rising corporate revenues, the strength of the US dollar and demand for wage increases. US jobless claims are now at their lowest point since 1973 and it is likely that tightening margins will be a theme for this upcoming earnings season.”
 
In terms of currencies, stronger core inflation data has boosted the greenback versus major peers. Gupta writes: “In contrast to the negative inflation scenario in Europe, consumer prices excluding food and fuel climbed the most in three months aiding the US dollar’s rise to a seven week high versus the euro. The lowest UK unemployment reading 5.4 per cent in seven years helped the sterling gain support after the negative monthly CPI data sparked an initial sell off. The European central bank will announce its policy decision this week and investors are relying on the expansion of the quantitative easing program after the recent weakness in economic data. The Australian central bank this week highlighted concerns of a slowdown in the overheated housing market sending the Aussie dollar sharply lower. The loonie remained resilient ahead of the Bank of Canada rate decision on Thursday. The minutes of the Bank of Japan meeting showed no signs of further quantitative easing keeping the Yen strong over the week.”

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