Asian shares firm as China's GDP raises hopes of recovery

Andrew Galbraith, Reuters

Posted at Jan 17 2020 11:56 AM

Investors look at screens showing stock information at a brokerage house in Shanghai, China Jan. 16, 2020. Aly Song, Reuters

SHANGHAI -- Asian shares rose on Friday after global stock indexes and Wall Street posted more records, and as China's economic growth matched expectations in spite of US trade pressures.

The world's second-largest economy grew 6 percent in the fourth quarter of 2019 from a year earlier, and 6.1 percent for the full year, official data showed on Friday.

While China's growth in 2019 was the slowest pace of economic expansion in 29 years, held back by anemic domestic demand and the damaging trade war with the United States, it was in line with analyst expectations and within the government's official target.

"This is all good news and positive for the China story. All the data coming out, from industrial production, fixed asset to retail sales, they are all showing signs of bottoming out as the trade cycle bottoms out," said Daniel Gerard, senior multi-asset strategist at State Street Global Markets in Hong Kong.

Recent data has pointed to an improvement in Chinese manufacturing and business confidence as trade tensions eased, but analysts are not sure if the gains can be sustained and Beijing is widely expected to roll out more stimulus measures.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.1 percent.

China's blue-chip CSI300 index was 0.27% higher, extending a rally fuelled by hopes for improving relations with the United States that has seen it gain 9 percent since the beginning of December.

Australian shares added 0.47 percent after setting four consecutive record closing highs in previous days and Seoul's KOSPI rose 0.12 percent. Japan's Nikkei was up 0.49 percent after touching 15-month highs earlier in the session.

MSCI's global share index touched new highs and was last up 0.03 percent.

But analysts say global equities may find it difficult to maintain momentum from their recent rally as optimism over the US-China trade truce gives way to uncertainty over the next steps in trade talks.

While a Phase 1 deal signed by China and the United States on Wednesday is seen as defusing the 18-month row that has hit global growth, experts say it is unlikely to provide much balm for broader frictions between the two countries. Most of the tariffs imposed during the dispute remain in place and a number of thorny issues that sparked the conflict are still unresolved.

"The challenge from here is how long we can maintain these improvements," said Steven Daghlian, market analyst at CommSec in Sydney.

"Speaking of the Aussie market specifically, a 6 percent gain in 2 weeks is obviously a massive challenge to replicate in the tail end of the month. You don't really see 10, 11, 12 percent improvements over the course of a month without any gigantic positive catalysts."

In the United States on Thursday, a combination of upbeat earnings from Morgan Stanley, rising US retail sales, a strong labor market and robust manufacturing data helped to lift Wall Street to record highs.

The Phase 1 deal and the US Senate's approval of a revamp to the 26-year-old North American Free Trade Agreement also boosted investor spirits.

The Dow Jones Industrial Average rose 0.92 percent to 29,297.64, the S&P 500 gained 0.84 percent to 3,316.81 and the Nasdaq Composite added 1.06 percent to 9,357.13.

The US data supported the dollar, which held steady on Friday. The greenback hit eight-month highs against the yen before trimming its advance to rise 0.05 percent to 110.20. The euro was little changed at $1.1136.

The dollar index, which tracks the greenback against a basket of six major rivals, was a tick lower at 97.319.

The rally in equities was mirrored in US benchmark 10-year Treasury notes, which saw yields rise to 1.8266 percent from their close on Thursday at 1.809 percent. Yields rise as prices fall.

Commodity markets were quiet, with Brent crude futures adding just 3 cents to $64.58 per barrel. US West Texas Intermediate crude futures were also 3 cents higher at $58.55 per barrel.

Gold added 0.05 percent to $1,553.35 per ounce on the spot market.