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LGT Navigator: China's economy starts the new year with a record growth

April 16, 2021

The Chinese economy has overcome the deep recession caused by the corona crisis last year. In the US, economic data also point to a recovery, boosting the stock rally. The good figures are the result of progress on vaccinations and the easing of protective measures.

Shanghai

The Chinese economy started the new year with a record growth and seems to have largely overcome the corona crisis. Economic output in the first quarter grew by +18.3% compared with the same period of the previous year. This is the largest increase since 1992, when China reported quarterly figures for the first time. Analysts had expected a somewhat higher growth of +19%. The strong increase can be explained by the fact that the economy collapsed a year ago, as life came almost to a complete standstill for several weeks due to the pandemic. For 2021, the Chinese government expects the economy to grow over +6%. 

In Shanghai, the Shanghai Composite gains +0.5% on Friday. In Tokyo, the Nikkei trades +0.1% firmer and the Hang Seng in Hong Kong also gains +0.1%.

Good US economic data fuel stock rally

A series of surprisingly strong economic data as well as good quarterly earnings boosted US stock markets on Thursday. The Dow Jones gained +0.9% and closed for the first time above 34'000 points. The S&P 500 also climbed to a new high and advanced +1.1%. The Nasdaq Composite gained +1.3% and closed just below the record value of February.

Meanwhile, the US government has imposed new sanctions on Russia and is planning financial penalties. In addition, ten Russian diplomats will be expelled. Among other things, the US accuses Russia of manipulating the 2020 presidential election. The government in Moscow has announced countermeasures.

Progress in vaccinations drives upswing in the US

Progress on Covid-19 vaccinations and the easing of protective measures are starting to show results in the US labor market. Thus, initial jobless claims fell unexpectedly sharply last week. At 576'000, the number of filings is as low as it was last at the beginning of the corona crisis in March 2020. 

American retailers are also looking back on a successful month. They increased their sales significantly in March and took in +9.8% more compared to the previous month, according to the Department of Commerce. Market observers had expected a plus of +5.8%. The growth partially makes up for the decline in sales in February (-2.7%). The industry also benefited from the first private households to receive a check worth USD 1'400, which will be paid out as direct aid under the corona relief package.

American industry recovers

The outlook for the industrial sector in the state of New York brightened surprisingly significantly in April. The Empire State Index, which measures industrial activity in the region, rose 8.9 points from the previous month to 26.3. Analysts had expected an increase to 20 points. A reading above zero signals a recovery in activity. Meanwhile, the index is in positive territory for the tenth consecutive month, after plunging to a record low of -78.2 points in April 2020 due to the corona crisis.

Business confidence in Greater Philadelphia also brightened unexpectedly in April. The Philly Fed Index rose by 5.7 to 50.2 points. Market observers had expected a decline to 41.5 points. However, the March reading was revised sharply downward. The Philly Fed index measures industrial activity in the Philadelphia region, with a reading above zero points signaling an increase in economic activity. Nationwide, industrial production rose +1.4% in March. Economists had expected growth of +2.5%.

 

 

Economic Indicators April 16

MEZ Country Indicator Last
04:00 China GDP (Q1, y/y)) +6.5%
04:00 China Industrial production (March, y/y) +35.1%
08:30 CH Producer prices (March, m/m) +0.3%
11:00 EZ Consumer price index (April, y/y) +1.3%
16:00 US Uni Michigan consumer confidence (April) 84.9

Earnings Calender April 16

Country Corporate Period
US Morgan Stanley Q1

 

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

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