Antagonistic reaction from market participants to Chinese growth figures – Market Analysis – July 16

By: Miguel A. Rodriguez

09:45, 14 September 2020

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Chinese recovery numbers rock the boat for the whole of Asia

The Chinese economic figure for GDP YoY Q2 was higher than the market forecast, 3.2% vs. 2.5%, confirming that the Asian country is recovering at a higher rate than expected, a very positive figure since China is the primary reference for the worldwide economy.

However, Chinese stock indices have reacted to the downside in what may be a simple corrective move "buy the rumor and sell the news."

HongKong45 fell 2% on the day, and Shanghai Composite slumped 4.5%.


These falls in the Asian indices have influenced the European and North American indices.  

TECH100 index experienced more significant losses than the rest, with falls of around 1.5% during the session. 


 The causes of this index's negative behavior are due to technical reasons that we already anticipated in previous analysis: a high level of overbought with bearish divergences that could lead it to correct to the area around 10200. 

Mixed bag of news in Europe

The news that the European High Court has ruled against the pact with the United States to transfer data from European clients of North American technology companies to United States servers has also contributed to this. 

This can be a considerable obstacle for American technology companies to continue developing their business in Europe, so some of the leading Nasdaq stocks can curb their upward momentum, at least until an agreement or solution is reached.

In the United States, the June Retail Sales has been published with a rise of 7.5% above the expected 5%, although with a significant decrease compared to last month's figure, a logical difference since the May figure was the one that reflected the beginning of the reopening. 

This is a prominent figure of domestic demand that indicates that the economic recovery continues at a good pace. If it stays in this line, it would be a valid argument that would serve as a boost to the stock markets.

The ECB also held its monthly meeting without changes in policy, as expected. At the press conference, Lagarde expressed the central bank's intention to continue with its current system of purchasing assets, noting that the last few days had decreased in the pace of purchase due to the improvement in economic indicators. 

Lagarde mentioned the need for the EU to reach an agreement to implement the rescue fund, which, according to her, must be made up of loans and grants. 

This is undoubtedly the crucial factor that will shape the near future of the single currency and European stock indices. The achievement of an agreement and this fund's composition is what investors expect to know for this weekend.


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