Asian Stocks Rally as China GDP improves

Market Brief

The Asian trading session was dominated by a risk-on rally amid China’s economic data came in better than expected. Chinese y/y real GDP (4Q) increased by 7.9% (vs. 7.8% exp. & 7.4% prev), the real year-to-date GDP came up to 7.8% (vs.7.7% expected & previous), December y/y Industrial production advanced to 10.3% (vs. 10.1% prev), while December y/y retail sales surged to 15.2% (vs. 15.1% exp. and 14.9% prev). The encouraging data out of the World’s leading emerging economy drove the markets to the upside overnight. The Nikkei 225 rallied 2.86%, Hang Seng advanced 0.99%, Shanghai’s Composite surged 1.39%, while Kospi and Taiex added 0.69% and 1.53% respectively. The US and European stock futures followed the bullish move. The currency markets focused on the aggressive rally of USDJY, as the Japanese media speculated on BoJ’s consideration on removing 0.1% floor on short term interest rates. Overnight Japan announced that the foreign bond purchases surged to Yen391.3B from the Yen -398.2B, the foreign stock purchases decreased to Yen -155.3B from Yen 6.8B, while Foreign purchases on Japanese bonds and stocks increased to Yen 139.0B (vs Yen -1.8B) and Yen 233.8B (vs. Yen178.9B previously). The Japanese November m/m and y/y Industrial Production improved to -1.4% and -5.5% respectively (from -1.7% and -5.8%), while the November Capacity Utilization disappointed ( -0.2% vs. 1.6% previously). USDJPY crossed over 90.00, its lowest level since June 2010, while EURJPY broke 120.00 to the upside, and hit 120.71 early in the session. In US, the initial jobless claims and December Housing starts surprised to the upside, while Philadelphia Fed business outlook index reversed to -5.8% from 8.1% the month before. In New Zealand, the consumer confidence increased, the q/q CPI pointed down at -0.2% m/m, while y/y CPI failed to beat the expectations (actual 0.9%, vs. 1.2% exp. & 0.8% prev). In European leg, EURUSD recovered to month’s highest levels, EURCHF continued its rally up to 1.2569 early in the session. EURGBP hit 0.8380 (highest level since March 2012), while GBPUSD slumped down to 1.5964, amid David Cameron’s speech raising the specter of a potential U.K. exit from EU. Today, the focus is on UK m/m and y/y Retail Sales ex&with Auto Fuel, Canadian m/m November Manufacturing Sales, and the University Of Michigan Survey of Consumer Confidence Sentiment.