China Data Disappointment Drags On Stocks And Commodities

Overnight, China released disappointing Q4 GDP (5.2% vs street 5.3%) and retail sales (7.4% vs street 8.0%) reports, which the street appears to have taken a sign that the Middle Kingdom’s economy continues to struggle. Asia Pacific markets broadly sold off on the news, including drops of 3.7% for Hong Kong, 2.1% for Shanghai, and 2.5% for Seoul.

Weaker economic numbers from China also appear to be weighing on commodity markets, impacting expectations for future resource demand. US Crude Oil is down 2.4%, Copper is down 0.4%, and Natural Gas is down 3.2%. Meanwhile, with the US 10-year treasury note yield holding near 4.05% and the 10-year German bund yield back up near 2.25%, Gold is holding steady today. A cryptocurrency correction continues to accelerate with Bitcoin down 1.4%.

Downward momentum has carried into European trading action where the FTSE is down 1.75% and the Dax is down 1.00%, and on into early North American trading where US index futures are down 0.4%-0.5%, adding to yesterday’s US index declines of 0.2% to 0.6%. Worse than expected UK inflation, particularly consumer prices (4.0% vs street 3.8%), combined with the China data and yesterday’s terrible US Empire Manufacturing survey suggest Stagflation (low economic growth and high inflation) taking hold once again.   

It’s a busy day for North American economic news. US retail sales (0.6% vs street 0.4%) and Canadian industrial prices (-1.5% vs street -0.7%), both beat expectations. US industrial production (street 0.0%) is due at 9:15 am EST, followed by the US NAHB Housing Market Index (street 39) at 10:00 am. There are also three Fed speakers today and the Beige Book regional economic report is due at 2:00 pm.

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