China data holds the key to world markets
Spot iron ore’s recovery to above $US50 and a stronger overnight oil price should see a reversal in resource stocks and a firm opening for the ASX 200 index this morning as traders wait on release of key Chinese economic data due at midday.
While hopes of stabilising commodity prices provide something for optimists to pin their hopes for the Australian economy on, news that the weather bureau now sees a significant probability of an El Nino weather pattern by June is a negative. It creates a real prospect of a poor season for farmers and a potential downside for both the economy and the budget deficit.
Two key questions for market this week are how the US economy bounces out of the cold winter and how the Chinese economy is trending after the New Year. Data releases have not so far been encouraging on either front. The March bounce in US retail sales was less than expected, suggesting that US shoppers remain frugal, delivering only moderate trend growth in this important part of the economy over recent months.
The release of China’s economic data is likely to hold the key to world markets for the next trading session. Concerns over Monday’s weak trade data have created potential for volatility around today’s data. Weak data will build on negative sentiment over China while figures that are in line with expectations or a bit better might be a significant relief to markets.
For further comment from CMC Markets please call 02 8221 2137.
Frequently Asked Questions about this Article…
China's economic data is crucial for world markets because it can influence global trade dynamics and investor sentiment. Strong data can boost confidence and stabilize markets, while weak data can lead to volatility and negative sentiment.
The recovery of iron ore prices positively impacts the Australian economy by boosting resource stocks and potentially leading to a stronger ASX 200 index. This can provide optimism for economic stability and growth.
An El Nino weather pattern can negatively affect the economy by leading to poor agricultural seasons, which can hurt farmers and potentially increase the budget deficit due to reduced agricultural output.
US retail sales are a key indicator of consumer spending, which is a major component of economic growth. Moderate growth in retail sales suggests that consumers are cautious, impacting overall economic momentum.
Weak Chinese trade data could lead to increased market volatility and negative sentiment, as investors may worry about the health of the Chinese economy and its impact on global markets.
Stabilizing commodity prices can benefit investors by reducing market volatility and providing a more predictable environment for investment, potentially leading to better returns on resource stocks.
Farmers face potential risks such as droughts and reduced crop yields with an El Nino forecast, which can lead to financial strain and impact the agricultural sector's contribution to the economy.
Investors can prepare for potential market volatility by diversifying their portfolios, staying informed about economic indicators, and considering hedging strategies to mitigate risks associated with unexpected data outcomes.
Call 1300 880 160
Start a chat
Schedule a call
