Daily Market Commentary 19th April 2023

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Markets ‘ebbed and flowed’ overnight, as European and German ZEW Economic Sentiment remained in the doldrums, while Chinese economic data showed signs of encouragement for the 2023 year. Chinese annualised GDP jumped to 4.5%, much stronger than expected and with a green arrow. Chinese Industrial Production and Retail Sales also surged, as lock-down restrictions are in the past and a strong rebound year, is now expected.  The caveat on this is Geo-Political storms brewing over Taiwan and China’s support for BRIC’s and more particularly , Russia. If the Western Countries decide to place China on the ‘sanctions escalator’, then we could see a tragic fall-out for China and the global economy. If the 2022 sanctions regime is anything to go by, possible sanctions will boomerang on the imposers, causing considerable economic and social damage globally. US Building Permits and Housing Starts both sank into negative territory, confirming the struggle in the housing sector. US corporate earnings have been mixed, despite lower expectations and these will impact equities over the next couple of weeks. The EUR pushed back to 1.0950, while the GBP rose back above 1.2400, ahead of key UK inflation data set to be released tonight.

The softer reserve allowed the AUD to push back above 0.6700, while the NZD looks to regain 0.6200, following better than expected Dairy Prices. The release of the RBA minutes yesterday, revealed that the interest rate pause this month by the RBA, was a line-ball call and that rates may indeed continue to rise. The ‘peak inflation’ narrative call, was extremely brave from the RBA, as their track record on inflation has been abysmal. Market attention will turn to the Japanese Tankan report, set to be released today and tonight’s UK inflation number (expected to fall below 10%?).

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