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The financial markets on the rise, boosted by positive Chinese GDP

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Miguel A. Rodriguez
Miguel A. Rodriguez
05 November 2022
China's gross domestic product (GDP) came out yesterday, expanding 4.8% in the first quarter from a year earlier. The GDP beat the market expectations and picked up from 4.0% in Q4.

A surprisingly strong start to the first two months of the year improved the headline numbers, with GDP rising 1.3% between January and March on a quarter-on-quarter basis, compared with expectations for a 0.6% raise and a gain revised from 1.5% in the previous quarter.

However, analysts say April's data is likely to worsen, with lockdowns at the Shanghai commercial centre and elsewhere dragging on, prompting some to warn of economic downturn risks in the area.

For now, the figure was better than expected, and China continues to be the global economic engine. Therefore, the influence of this data on the markets is positive, or at least it has not added an additional element of concern to those that already exist, such as rising interest rates and the war in Ukraine.

But the data had a direct impact on the price of oil by ruling out, for the moment, one of the factors that were considered potential reasons for a drop in the price of crude oil - the decrease in demand from China, the main global consumer, due to a slowdown in its economy.

Oil rose over 2% yesterday, breaking above the 107.70 level, which is the 0.618% Fibonacci retracement of the last leg down, thus paving the way for further advances towards the 111.50 area.

Disruptions in some production facilities in Libya also contributed to this rise yesterday.

With the continuous increase in energy prices, oil, and Natural Gas, peak inflation expectations have been reached fades. The market interest rates continue to rise, with the US 10-year bond reaching the 2.87% level.

This, in principle, is not a positive factor for the stock markets. However, yesterday the US indices experienced rises in a session of continuous ups and downs. This better performance of US stock markets is in the publication of earnings reports, including for one of the big North American banks, Bank of America. In addition to the better prospects for an increase in financial margins derived from the rate hike, the bank presented results that beat forecasts in revenue and earnings per share and experienced more than 3% increases.

Sources: Bloomberg, Reuters.

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Miguel A. Rodriguez
Miguel A. Rodriguez
Financial Writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.