China's economic data boosts Asian markets, eases early losses

April 18, 2023 (MLN): Asian markets fell on Tuesday but pared early losses after data showed China's economy grew far more than expected in the first quarter as activity resumed after three years of painful zero-Covid measures, as APP reported. 

The blockbuster 4.5% expansion, along with above-forecast retail sales, revived optimism for an economic recovery in the country after its worst performance in decades last year.

The figures are the first snapshot since 2019 of a Chinese economy unencumbered by public health restrictions, which included months-long city-wide lockdowns that brought large parts of the country to a standstill.

However, while the readings bode well for the world's second-biggest economy, inflation data last week showed consumer activity remained sluggish, suggesting the recovery could still take time.

Investors also continue to fret over Federal Reserve plans to hike interest rates as officials try to rein in US inflation, with top policymakers seeming to be split over how many more increases are needed.

Wall Street's three main indexes ended slightly higher in muted trade as investors there awaited the release of fresh earnings following broadly positive results from banking giants including JP Morgan and Citigroup.

A surprise jump in a closely watched index tracking New York state manufacturing added to the buying sentiment, while the VIX Index of market volatility dipped below 17 to its lowest since the start of last year.

"The subtle yet positive data beat goes on after last week's highlight reel was almost uniformly hopeful, including progress on inflation, better growth than expected, the possibility of fewer rate hikes, and some constructive big bank earnings," said SPI Asset Management's Stephen Innes.

But after a healthy run-up Monday, Asia struggled, though the China data provided a little boost.

Hong Kong, Shanghai, Sydney, Seoul, Singapore, Wellington, Taipei, and Manila all dipped though Tokyo and Jakarta edged up.

Focus now turns to the release of fresh US earnings this week from big-ticket names including Bank of America, Morgan Stanley, Johnson & Johnson, Netflix, Tesla, Ericsson, and Nokia.

"Earnings season is having its best start since 2012 as around 90 percent of S&P 500 companies are delivering earnings beats," said OANDA's Edward Moya.

"Pessimism was so high that earnings have been revised so low that everyone is beating."

However, traders will still be nervously watching the reports from the financial sector following last month's banking turmoil that saw three regional US lenders go under and Credit Suisse taken over.

"The focus on the hundreds of regional banks reporting in coming days will be firmly on the extent of deposit outflows relative to street expectations," said Ray Attrill at National Australia Bank.

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