Markets up after Chinese data deluge

Chinese data misses the mark but it could have been worse.

London skyline
Source: Bloomberg

Traders can be a cynical bunch and Chinese official economic data has not always warranted unwavering trust and although China missed the mark, it came closer than many had feared. It appears traders have decided it could have been much worse. So far this year, where China goes the rest of the world follows, and having added over 3% overnight European traders followed suit.

This morning’s UK inflation picture has surprisingly come in stronger than expected even with oil prices still remaining at uncomfortably low levels and this only added to the market’s momentum. The currency and futures markets have spent much of the last month writing down the chances of a UK interest rate rise to the extent that a cut now might be the more realistic course of action.

The Bank of England governor, Mark Carney, went some way to agreeing with these markets today when he played down the chances of an interest rate rise. This triggered renewed selling pressure in GBP/USD forcing it down to five-and-a-half-year lows.

Pessimism over the government’s determination to sell off its remaining 9% holding in Lloyds has wavered ever since it broke below its break-even level at the end of December. Having hit intraday lows yesterday – below 63p – it looks like the bears might have finally found a low enough level to entice the buyers back in.

Overnight operating updates from BHP Billiton will also add clarity as to how able it is to continue paying out dividends; with a combination of write-downs and disasters the writing could already be on the wall. A discount to bid levels normally appears with companies waiting for takeovers to be completed, especially if part of the deal involves equity as well as cash. However with a discrepancy of almost 60p between these levels in BG Group, fears are obviously high that Shell will buckle at the last minute.  

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