Markets Outside US Advance on European Bonds Sale, Strong French Data

Global stocks outside the US gained even though China posted weak data once again, as dearer oil pushed Asian markets up, while the European rally was supported by solid growth in France, good corporate data and the sale of bonds by ECB, staving off the dangerous increase in 10-year yields.

Kristian Rouz – Stocks in Asia-Pacific and Europe were mostly up today as the Eurobonds rout stopped along with the halted rise in 10-year yields ahead of the European Central Bank (ECB) emission of new bonds, while unexpectedly strong data from France and expectations of further stimulus in mainland China all rendered investors optimistic, promising better profits soon.

In Asia-Pacific, markets outside mainland China were all up, while investors cashed out of Chinese stock after Beijing released a yet another set of disappointing macro data, suggesting the need for either a massive stimulus of economic reform in the Communist nation, with both options very unlikely.

China reported a less-than-expected expansion in its industrial output in April, just an annualized 5.9% against the projected 6%. In March, the figure was 5.6%. China’s retail sales data were also softer, with a 10% year-on-year increase in April compared to the expected 10.5%. Fixed-asset investment rose only 12% in 2015 thus far, below the previously forecast 13.5%. 

The Chinese data signals that a slowdown in industrial manufacturing and infrastructure/real estate is poised to carry on into Q2, spurring demand for more decisive policies from Beijing, which the latter is hardly able to deliver.

"Expect the pace of easing to be increased, or at least maintained, by the authorities through the year, in order for the GDP target of 7 percent to be attained," Chester Liaw of the Singapore-based Forecast Pte said.

In Australia, the S&P/ASX 200 hit it one-week high, up 0.71%, surprisingly against the Chinese, as investors were encouraged by the ‘market-friendly’ nation’s budget for 2015 in its final reading. In Korea, the Kospi Index was also up 0.83%, to its one-week highest.

In Tokyo, energy shares led the rally in the Nikkei 225 Index, up 0.7% at the close. Inpex Corp., the nation’s biggest oil trader, was up 1.6% as US crude futures surpassed the $61/bbl threshold. However, healthcare posted even greater gains, with the drug-maker Santen Pharmaceuticals skyrocketing 14% on its rating’s upward review.

The MSCI APEX 50 Index rose 0.3% in Hong Kong. Asian stocks are best described as calm before the storm as investors have their eyes on China and Beijing’s actions toward spurring the staggering economy. If the Communists fail to foster the domestic market, a dramatic sell-off is almost imminent, as the Eurozone is now yielding more lucrative investment opportunities.

France has just beaten Germany, outpacing the latter in terms of economic expansion. France’s GDP gains in Q1 reached 0.6%, above  the estimated 0.4% and surpassing the German Q1 growth of 0.3%. The best in two years growth figures in France, along with signs of improvement in Spain suggest the EB policy measures are actually working, cementing investors’ confidence in the European stocks.

In Paris, the CAC 40 Index added 1%, in Frankfurt, the DAX Index rose 0.9%. The Stoxx Europe 600 advanced 0.9% as the sell-off in European bonds stopped. Consequently, the S&P 500 futures rose 0.4% overnight in New York, promising a rally on Wall Street at the open on Wednesday.

The Eurozone has seemingly benefitted from the weaker euro, with industries picking up. Companies, including the French media giant Vivendi and the English brewer SABMiller, posted solid earnings, suggesting the expansion in the region’s stock markets has a reliable backing in the real economy.

On Stoxx 600, all 19 industry groups gained, amount of shares bought and sold 11% higher the 30-days average, indicating a buoyant rally.