UKX FTSE 100 Index

By Paul J. Davies 

Stronger Chinese growth data lifted Asian stocks Wednesday, although European indexes were down marginally, suggesting that investors were taking a pause after several days of rising prices.

U.S. markets were priced to open higher again, however, with futures for the Dow Jones Industrial Average up 0.1% and the S&P 500 0.2% higher.

The Shanghai A-Share index in China and the Nikkei 225 in Japan were both up around 0.25% Wednesday after data showed first-quarter Chinese gross domestic product was better than expected, with growth of 6.4% year-over-year, boosted by very strong industrial production and much better retail sales.

The news led economists at Citigroup and ING to lift their full-year forecasts for China's GDP growth to 6.6% and 6.5% respectively, although there were differences on how healthy the growth was. Citigroup economists expect a U.S.-China trade deal to be concluded and tariffs slashed in the second quarter and think China's economic policies are becoming more effective at boosting economic demand.

ING's economists thought, however, that state-driven infrastructure investment was much more important than consumer demand, pointing out that cement production jumped 22% in March over the same month last year.

Diana Choyleva, the chief economist at Enodo Economics, was also more skeptical.

"We have our doubts about the headline official data, but they confirm what our deeper analysis is showing: the government has had little choice but to ramp up state-sector investment spending," she said.

In Europe, the Stoxx 600 index was down 0.1% lower after having hit its highest closing level in 2019 on Tuesday. The FTSE 100, which had also closed at a 2019 record, slipped at the open, but later recovered to be flat by mid-morning. As with American stocks, the recent European rally has been a bloodless one with relatively weak trading volumes, especially this week ahead of the Easter holiday.

But evidence of an appetite for risk was visible in rising government bond yields. The U.S. 10-year Treasury rose on Wednesday to 2.608%, from 2.592% on Tuesday afternoon. The German 10-year bund yield also climbed, to 0.085% from 0.069%.

Both have now retraced almost all of their moves since a rush into safe assets in late March lifted prices and pushed down yields.

The 10-year German yield, which turned negative in late March and early April, is now at its highest since March 6. In the U.S., the yield gap between three-month and 10-year Treasurys, which also turned negative in late March, is now at its widest since March 11.

Another haven, gold, hit its lowest price since the depths of the stock market selloff in late December on Tuesday. It recovered fractionally on Wednesday trading up 0.01% at $1,278.50, but remains at its lowest since late December.

Brent crude oil was up 0.7% at $72.22. The WSJ Dollar Index, which measures the dollar against a basket of currencies, was down 0.14%.

Write to Paul J. Davies at paul.davies@wsj.com

(END) Dow Jones Newswires

April 17, 2019 06:55 ET (10:55 GMT)

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