Stock markets hit record highs as Chinese GDP beats forecasts – business live

Craig James, chief economist at Commonwealth Securities in Sydney, says China’s latest growth figures may indicate that the world economy is holding up.

He says (via Reuters):

“(The new data) is encouraging for global growth as well because China is the second largest economy on the planet.”

“Based on this data, there is no need for easing and no need really for tightening either because inflationary pressures are very much contained. So I think the People’s Bank of China just continues to be watchful.”

Bill Adams, senior international economist at PNC Bank, believes the figures bode well for growth across developing economies.

He writes:

As China goes, so go emerging markets. Its solid growth reinforces recoveries for commodity exporters and keeps 2017’s pick-up in global growth on track,”

But Elsa Lignos, global head of FX strategy at Royal Bank of Canada, points out that the growth was probably driven by borrowing.

She writes:

China Q2 GDP was firmer than expected (6.9%y/y, cons 6.8%, prior 6.9%), driven by a sizeable pick-up in industrial production. Sentiment was dampened by the Stats Bureau’s acknowledgement that H1 economic growth was “hard won”.

Our Asia strategist calls that an understatement to be sure; GDP growth was clearly buffered by significant credit expansion to ensure headline growth remained at or above target. Most recognise the dangerous imbalances/can-kicking involved in China’s growth strategy.

The news that China’s GDP beat expectations drove shares up across Asia, although ironically Chinese investors didn’t share the enthusiasm.

The Hong Kong Hang Seng rose by 0.3%, while Korea’s Kospi and India’s Sensex gained almost 0.4%.

That helped to drive global markets to a new all-time high:

Mike van Dulken of Accendo Markets says “better-than-expected China GDP data” boosted confidence.

This after six years of slowing, suggesting successful management of stimulus.

However, the party didn’t reach China itself, where the Shanghai Shenzhen CSI 300 Index dropped by almost 1%.

The selloff was sparked by traders rushing to sell shares after the People’s Bank of China injected fresh liquidity into the system.

That caused some alarm on the trading floors, as Marketwatch explains:

“It’s reverse psychology,” said Hao Hong, managing director and head of research at BOCOM International. “If everything is fine, you don’t have to inject liquidity. But if they’re injecting liquidity, something must be wrong.”

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

China has got the new week off to a good start, by releasing growth figures that beat City expectations.

The Chinese economy grew at an annual pace of 6.9% in the last quarter, according to official government figures, matching China’s growth in January-March.

That beat analyst forecasts of 6.8%, and is ahead of Beijing’s target of growing GDP by 6.5% this year. This should calm concerns that China’s economy is heading for a hard landing, as its leaders try to shift away from manufacturing and towards a service-based economy.

The National Bureau of Statistics said the figures showed China’s economy had become “more stable, co-ordinated and sustainable”.

But the agency also struck a cautious notes, saying that :

Overall, the economy continued to show steady progress in the first half…but international instability and uncertainties are still relatively large, and the domestic long-term buildup of structural imbalances remain.

The NBS also warned that China’s economy also faces “many unstable and uncertain factors abroad”; perhaps a nod to president Trump’s protectionist rhetoric, or perhaps Britain’s exit from the EU….

Separate government figures also suggested that the Chinese economy seems to be holding up, despite persistent worries over the country’s growing debts.

They showed that:

• China’s factory output grew 7.6% in June from a year earlier, the fastest pace in three months,
  
• Fixed-asset investment expanded by 8.6% percent in the first six months of 2017 both beating forecasts.
• Retail sales rose 11.0% in June from a year earlier, the fastest pace since December 2015

I’ll pull some reaction together now….

Also coming up today:

The final estimate of inflation across the euro area is released this morning. It’s likely to confirm that the eurozone inflation rate dropped to 1.3% in June, taking some pressure off the European Central Bank to start tapering its stimulus programme.

In the US, we also get a new healthcheck on New York’s manufacturing sector.

• 10am BST: Eurozone Consumer Price Index for June
• 1.30pm BST: The US Empire Manufacturing (JUL)