While some may debate the validity of Chinese economic statistics (only when they are strong mind you), the market took the surge on both Chinese exports and imports as a good sign. And the fact is, it is a good sign. Playing the 'I don’t believe the numbers' game presents some serious problems, and anyway people could just turn around and argue that growth is in fact stronger than the numbers suggest.
Anyway, sentiment was further buoyed by a surge in German industrial production for the merry month of March – up 2.2 per cent after a 0.6 per cent rise the month prior. Things are on the up and so far when you look at the big economies, global economic momentum looks to be accelerating. Don’t forget these figures come after a series of exceptionally strong US jobs reports.
It’s hard to argue with the fact that the global economy is accelerating, which puts recent rate cut decision by the Reserve Bank and European Central Bank into perspective. These guys are missing the big picture and exposing the economy to unnecessary risk again. But this isn’t unusual – in fact it’s the norm. You don’t have to go back too far to see the last time this happened in 2008, when the world was effectively in recession yet central banks kept hiking rates.
But for the globe, momentum is good and for once commodities managed to get a boost from the data. Crude rose almost 1 per cent to $96.54, copper was up 1.7 per cent and gold $23 higher as I write, to $1472.
European stocks in turn put in a solid performance, with the Dax 0.8 per cent to a new record high, the CaC 0.9 per cent higher and the FTSE up just 0.4 per cent. Other than the German data there wasn’t much news flow or anything else really from Europe. The only other thing I’d note is that the euro got a solid boost from the German data, rising 65 pips or so to 1.3157.
So over to the US, the major indices had a more modest session but they’re still punching new records. The solid data out of Germany and China, plus some decent US earnings reports, saw stocks close 0.4 per cent higher on the S&P500 (1632), the Dow rise 0.3 per cent (15,105) and the Nasdaq lift 0.5 per cent to 3413. Not a strong session by any means, but new records all the same and the fifth consecutive gain from the S&P. By sector we saw a good performance from basic materials, telecommunications and tech stocks.
Bits and pieces otherwise, the Australian dollar is sitting at 1.0173 having hit a high of 1.0207, and US bond yields were down slightly – smalls really, with the 10-year yield at 1.77 per cent, the 5-year at 0.74 per cent and the 2-year at 0.23 per cent.
Other than that I’d just note that it’s very positive to see the weight of opinion opposed to the Reserve Bank's explicit currency target which, as many rightly point out, could do more harm than good. Excessively low rates don’t end well, especially when they are in fact not accompanied by any restraint in government spending. In contrast to claims made by the government and their propagandists, government spending actually continues and is forecast to continue to rise at a solid clip. There was never any real consolidation in place by this government.
For today, the SPI suggests Aussie stocks will rise 0.3 per cent and the major data release will be employment figures. The consensus is that jobs rose 11,000 in April, while the unemployment rate is forecast to have remained unchanged at 5.6 per cent.
Outside of that we see Chinese inflation statistic (which aren’t believable anyway) and tonight we get UK industrial production, the Bank of England's meeting (no changes as yet expected) and for the US, jobless claims and wholesale inventories.
Have a good one…
Adam Carr is a leading market economist.
Follow @AdamCarrEcon on Twitter.