Lower Chinese GDP Weighs On High Yielders: April 15, 2012

Markets are trading mostly sideways with safe-haven assets seeing a slightly bid tone after disappointing GDP data out of China (first quarter figures), brought another round of risk-aversion. After the recent rallies seen in equity markets are looking particularly to any suggestion that the slowdown in global growth is coming back into the picture. Friday’s main macro event, however, turns the focus back to interest rate discussions in the US, with the Consumer Price Index (CPI) scheduled for release.

One of the bigger sources of selling after the Chinese GDP data was seen with the Australian dollar, which dropped 0.6 percent, on speculation that the nation’s exports companies will produce and sell fewer raw materials. On an annual basis, Chinese GDP growth increased at a rate of 8.1 percent for Q1 2012, dropping from 8.9 percent in the final quarter of 2011.

Consensus estimates were calling for a rise of 8.4 percent. Losses were tempered, however, as we also saw the Industrial Production figures in China, which rose 11.9 percent for the month of March and beat expectations of an 11.6 percent rise. Rounding out the data releases was the Retail Sales figure, which showed an increase of 15.2 percent on a yearly basis (roughly in line with expectations).

In the UK, FTSE 100 futures are pointed to a lower open ahead of today’s Input and Output Producer Price Indices and corporate earnings coming from Norcon. In Europe, the DAX and CAC futures are looking similar, with Friday’s main macro figures being the Consumer Price Index in Germany and Industrial Output in Italy. Corporate earnings by Zardoya Otis, EMS Chemie Holdings, Premuda, and Basware Oyj were also released.

In the US, most of the attention will be focused on the University of Michigan Consumer Confidence survey, as well as the CPI figures.The financial sector will also see some major releases, with Wells Fargo and JP Morgan Chase reporting earnings along with iGate Corp. and Duckwall-ALCO Stores. Equity markets will be paying most of the attention to the CPI figures as this will likely lead to some analyst revisions for future interest rate changes from the Federal Reserve.
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The downtrend in the USD/CHF remains in place as prices continue to post lower highs on the 4H charts. Support has moved down to the 0.9090 area and a break here targets a drop of another 100 points. Short-term sell entries can be taken on rallies to 0.9160, targeting a test of the 0.90 figure. Bias will shift, however, if prices manage to rise above 0.92, as this will remove the longer-term downtrend and target a rise back into the 0.9330 region first.

The FTSE 100 continues to roll over from its late February highs at 5940.  We did technically see a break of significant Fibonacci support but prices managed to post a short term rally, which suggests that prices will likely extend further before a resumption of the longer-term downtrend. The key level to the downside is 5495, and a break here will accelerate losses.