The sharemarket snapped a six-day losing streak yesterday after new data showed Chinese economic growth, for the June quarter, had come in bang on economists' expectations.
It may have been the slowest annual growth rate in three years, at 7.6 per cent, but investors were unconcerned.
Instead, they cheered because there were no surprises, and because China's authorities appeared to be successfully manufacturing a slowdown in economic activity - the vaunted "soft landing" - while curbing inflation without killing growth.
The news lifted local resource and financial stocks and helped the sharemarket close the week on a high, delivering a week's end reprieve to investors who had spent the past six days watching the bourse track backwards.
Yesterday, the S&P/ASX 200 index gained 14.2 points, or 0.35 per cent, at 4082.2. But for the week, it lost 75.6 points, or 1.8 per cent.
"If [China's economic growth figure] came in at much lower than consensus forecast [then] you would have seen a negative reaction," the head of asset management at HSBC Australia, Geoff Pidgeon, said.
"China is in a trade-off between inflationary pressure, asset bubbles, and growth ... That's why they've really put the brakes on growth over the last year ... [and] we think they can actually handle this balancing act quite well."
The Australian dollar strengthened on the news, but fell in late trade, unable to hold onto the early gains. It closed at US101.58?, down from US101.64?.
Yesterday evening, European sharemarkets had advanced in opening trade as dealers welcomed the news, and set aside news of a Moody's ratings downgrade for debt-laden Italy.
An IG analyst, Cameron Peacock, said there was a collective sigh of relief around global markets following the China news, with short positions established over the previous 24 hours being quickly unwound.
"[On Thursday] you saw big names in BHP and Rio getting getting sold off quite heavily, and I said ... we were either going to be justified in the sell-off, or it was going to be seen as an over-reaction," Mr Cameron said.
"Find me another country that's growing at 7.5 per cent growth domestic product on the base size of what China is, it just seems a massive beat-up to me. Doom and gloom is the default position of the market at the moment."
Among the miners, BHP Billiton finished 8? higher at $30.48 after a three-year closing low on Thursday. But Rio Tinto lost 17? at $54.08.
The banks all rose. Westpac gained 18? at $22.05, National Australia Bank gained 14? to $23.60, ANZ increased 17? to $22.35 and Commonwealth Bank rose 26? to $53.77.
In the retail sector, womenswear retailer Specialty Fashion shed 2? to 50? after it warned full-year earnings would halve.
Shares of paint maker Duluxgroup rose 1? to $3.04 after it again extended a takeover timetable for its bid for building products supplier Alesco Corporation, which closed 2? weaker at $1.97.
with agencies
Frequently Asked Questions about this Article…
What did the latest China economic growth data show and why did investors take heart?
The article reports China’s June-quarter annual growth came in at about 7.6% — the slowest in three years but broadly in line with economists’ expectations. Investors cheered because the number was predictable and suggested Chinese authorities may be engineering a “soft landing,” slowing growth enough to curb inflation without triggering a sharp downturn.
How did the ASX 200 and the Australian sharemarket react to the China news?
After the China data, the S&P/ASX 200 rose by 14.2 points (around 0.35%) to 4,082.2, snapping a six‑day losing streak. Despite that one‑day gain, the index finished the week down about 75.6 points (roughly 1.8%).
Which sectors and stocks benefited from the improved China outlook?
Resource and financial stocks were lifted by the news. Among miners, BHP Billiton strengthened (closing at about $30.48) while Rio Tinto was weaker (around $54.08). Major banks also rose, with Westpac, National Australia Bank, ANZ and Commonwealth Bank all finishing higher on the day.
How did the Australian dollar move after the China economic update?
The Australian dollar initially strengthened on the China news but gave back gains late in trading. It closed around US101.58¢, slightly down from US101.64¢.
What did market analysts say about the market’s reaction to the China data?
HSBC Australia’s head of asset management, Geoff Pidgeon, said markets would have reacted negatively if China’s figure had been much lower and noted China is balancing inflation, asset bubbles and growth. An IG analyst, Cameron Peacock, said global markets collectively sighed with relief and that short positions taken in the prior 24 hours were quickly unwound.
Were there any notable company-specific moves mentioned in the article?
Yes. Specialty Fashion’s shares fell after it warned full-year earnings would halve. Duluxgroup’s shares rose after it again extended a takeover timetable for its bid for Alesco Corporation; Alesco’s stock closed weaker at about $1.97.
Did global events like the Moody’s downgrade of Italy derail the market rally?
No — the article notes European sharemarkets advanced in opening trade and largely set aside news of Moody’s downgrade for Italy’s sovereign rating as dealers welcomed the China data.
What can everyday investors learn from this market reaction to China’s growth data?
The article suggests a few takeaways: markets respond strongly to surprises (or a lack of them), global growth data can move local sharemarkets and currencies, and sentiment can flip quickly — for example, short positions were rapidly unwound after the China update. Paying attention to key macro releases and how analysts interpret them can help explain short‑term market moves.
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