Metals bounced higher on Friday as stronger than expected data came from
China, with a copper rally not seen in one year. China reported a
pick-up in factory production, investment, and real estate for
construction in July, beating expectations. Data and import and export
also rose indicating to investors that the Chinese economy is in the
process of stabilizing after decelerating in nine of the last ten
months.
A series of Chinese policy measures seem to have had a positive effect
and reversed an economic slowdown and the fear of hard landing for the
Chinese economy. Chinese analysts expect stable growth in the third
quarter with a possible acceleration in the fourth quarter. The
unexpectedly strong performance is driven mainly by a rebound in the
production of steel, cement, power and non-ferrous metals. This
underscores that China’s growth remains disproportionately reliant on
credit fuelled infrastructure and property construction.
Global stocks remained close to five-year records as a possible Chinese
turn around in the second half of 2013 fueled investors optimism, in
spite of a week of mixed activity across the world’s biggest financial
centers. This optimism fuelled markets in Europe, but failed to
translate for long in the US, as investors took profits after continuous
records on Wall Street over the last few weeks. The benchmark S&P
index fell for the second week after a rise in stocks on 19% since the
beginning of 2013.
In Europe the FTSE All World equity index hovered close to its best
level since 2006 after especially large global mining companies climbed
on the back of the Chinese data. Shanghai and the Australian stock
exchanges jumped as well on the data. In currencies, the US Dollar index
continued to lose ground on Friday, but gained against the Euro which
eased 24 points to USD 1.3354. USD/JPY descended 0.3 % to 96.38. The
Dollar is expected to be under downward pressure until the US Federal
Reserve (FED) decides on when to start to taper monetary easing.
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