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U.S., China and the Restrictions of Tepid GDP Growth

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Lots of news in China, inflation in the euro zone turns negative, and a record U.K. deficit. Here are some of things people in markets are talking about today.

China

Standard & Poor’s cut the outlook for China’s credit rating to negative from stable this morning, saying the nation's economic rebalancing will take longer than the firm had previously expected. The ratings agency's move is unlikely to do much to dampen the country's ambitions that have seen Chinese companies announce $113 billion in overseas deals since the start of the year, a total greater than the amount for the entire of 2014. This year also is in line to become the first that sees China overtake the U.S. as the world's top oil importer. 

Euro area inflation

Consumer prices in the euro area fell for a second month in March, dropping 0.1 percent, in line with the median estimate by economists surveyed by Bloomberg. Core inflation, which strips out food and energy prices, rose 1.0 percent according to data released on the eve of the commencement of the European Central Bank's expanded asset purchase operation. Euro area sovereign bonds were broadly unchanged after the release at the end of a quarter that saw rallies across the region. The euro climbed to $1.1370, its highest intraday level against the dollar since mid-February.

Markets

Asia stocks scrapped higher in the last trading session of the quarter, with the MSCI Asia Pacific Index adding 0.1 percent, to close out its best month since October. Chinese stocks listed in Hong Kong - the so-called H-share index - added 0.3 percent to enter a bull market. European stocks are falling for the first time in three days with the Stoxx 600 Index down 1.0 percent at 10:35 a.m. London time. S&P 500 futures are pointing to a lower open, falling 0.2 percent. In commodities, oil has dropped below $38 a barrel and gold is ending its best quarter since Reagan was in the White House

U.K. GDP and current account

The final print of U.K. fourth quarter 2015 GDP showed a slight revision higher to 0.6 percent, with growth being led by consumers. Separate figures showed the current-account deficit widened to 32.7 billion pounds - or 7 percent of GDP - far greater than estimates and the most since records began in 1955. The deficit numbers are likely to be overshadowed today by the problems at Tata Steel Ltd.'s U.K. operation, which the company has put up for sale. Prime Minister David Cameron this morning said he is opposed to taking the operation, which employs 6,500 people in Wales, into public ownership.

EM politics

Political problems in the BRICS continue today, with South Africa's President Jacob Zuma joining Brazil's President Dilma Rousseff in the 'EM president under pressure' stakes. South Africa’s highest court ruled that Zuma violated the constitution when he did not repay taxpayer money used to upgrade his private home. The possibility of Rousseff's impeachment has generated a rally in the Brazilian real, pushing it to the best performing currency in the world this year. This morning's ruling against Zuma has sent the rand up to 14.78 against the dollar, its highest level since December

 

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