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May 27, 2017

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Worries over China still weigh on global markets

LONDON/HONG KONG--Further disappointing Chinese economic figures kept market sentiment in check Thursday, after a volatile week that has been dominated by concerns over the world's number 2 economy.

Markets largely brushed aside the move by the Reserve Bank of New Zealand to raise its main interest rate by a quarter of a percentage point to 2.75 percent. Though other central banks have raised rates since the global financial crisis of 2008, such as increases in 2011 by the European Central Bank and Sweden's Riksbank, analysts said the move by the New Zealand central bank may represent a milestone in the global recovery.

Craig Erlam, market analyst at Alpari said the move marked "the beginning of a new chapter for the recovery in the global economy."

In Europe, the FTSE 100 index of leading British shares was flat at 6,620 while Germany's DAX rose 0.2 percent to 9,209. The CAC-40 in France was 0.2 percent higher, too, at 4,313.

Wall Street was poised for a steady opening, with both Dow futures and the broader S&P 500 futures 0.2 percent higher. How U.S. markets fare could hinge on retail sales figures for February due before the opening bell.

Most market attention, though, remains focused on China amid fears that its economy is beginning to struggle. Those fears accentuated Thursday after China said industrial output, which measures production at factories, workshops and mines, rose 8.6 percent year on year in January and February, the slowest rate since April 2009, at the height of the global financial crisis.

At the same time retail sales, a key indicator of consumer spending, were up 11.8 percent, which was also the worst performance for several years. However, the news adds to speculation the Chinese economy — a crucial driver of regional and global growth — is slowing and comes days after officials announced a surprise trade deficit in February, which sent world shares tumbling.

Ongoing concerns about the situation in Ukraine have also kept a lid on sentiment this week, with a referendum due Sunday in Crimea about whether the region should join Russia.

"While U.S. markets appear to be finding a level of support quite near their all-time highs, European markets continue to show much less resilience, weighed down by concerns about a slowdown in China, as well as worries about where the current uncertain situation in Ukraine is going to lead," said Michael Hewson, chief market analyst at CMC Markets.

In Asia, markets were mostly higher on Thursday but sentiment took a hit after China released another batch of disappointing data, adding to fears about growth in the economic giant.

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