Risk Appetite Knocked Down By China GDP

Risk sentiment was knocked down in today's Asian session by weaker than expected China data, which prompted concerns on recovery slowdown. China's GDP grew 7.7% yoy in 1Q13, down from 7.9% a quarter ago. Growth was 1.6% qoq in the first quarter, down from 2% qoq in 4Q12. That was much worse than the expectation of 8.0% annualized growth. Industrial production rose 8.9% yoy, compared with the 9.9% yoy gain combined in the first 2 months. Fixed asset investment, excluding rural households soared 20.9% yoy in 1Q13, following a 21.2% yoy gain in the first 2 months. Retail sales rose 12.6% yoy in March. Aussie and Kiwi were hit hard on risk aversion, while the yen extended it's broad based rebound. European majors, were generally steady against the dollar.

The World Bank stated that Asian countries should consider lifting monetary easing so as to avoid asset bubbles and inflation. The world lender said that "near-zero interest rates and new and protracted rounds of quantitative easing in the United States, European Union, and Japan are inducing large capital inflows into emerging markets including in East Asia... The risk of an asset boom in the markets, in which global liquidity spills over is emerging, with asset valuations moving ahead of fundamentals and possibly a correction down the road". Last week, IMF director Lagarde stated that Asian central banks should "think about the timing and pace of withdrawing monetary support".

Latest CFTC data showed deterioration in the GBP and CAD positions on April 9, compared to the prior week. Positioning was relatively steady elsewhere. Euro net shorts dropped back from -65.7k to -50.9k. Yen position was relatively steady with -77.7k net shorts. Sterling net shorts rose again to -70k, compared to prior week's -65k. Sterling positions have deteriorated since late December, with just two weeks of recovery in between. Canadian dollar net shorts rose to -71.1k, from -64.5k. CAD's position has been persistently deteriorating since last September. Australian dollar net longs dropped slightly, from 84.0k to 77.9k.

On the data front, the U.K. rightmove house price rose 2.1% mom in April. Australia home loans rose 2.0% in February. Japan industrial production rose 0.6% mom in February. Looking ahead, the eurozone trade balance will be featured in the European session. The Empire state manufacturing, TIC capital flow and NAHB housing market index will be released in the U.S. session.