Risk appetite is still mostly about Chinese growth

Chinese data ‘beats’ are building up to a possible crescendo on Wednesday

Tuesday’s 10.6% year-on-year rise in house price growth to a two-year high was a case in point. Together with a 0.6% monthly advance, optimism looks unabated. The chief takeaway is a possible uplift for this week’s first-quarter GDP, set for Wednesday.  The release, together with retail sales, industrial output and urban investment updates, will be critical for risk appetite this week and beyond.

Shanghai and Shenzhen stock indices have been resurgent of late as Chinese data readings hint that a slowdown is shallower than feared. This has helped refuel global market rebounds too. Somewhat further out—as per U.S. equity markets—sentiment may become more complicated as investors factor in how improving metrics could moderate the need for accommodative policy. Switzerland’s UBS has already shaved 200 basis points from potential PBOC rate cuts (RRR) in 2019.

For now though, economists polled by Reuters still expect China’s growth to have slowed to a new 27-year low in Q1 at 6.3%, compared to Q4’s 6.4%. Markets are still likely to seize on any signs of a turnaround in March. Most probably, investors will continue to side-line worries that a rebound in credit use will add to China’s already huge public debt. If so, key global markets could take another shot at pre-correction highs.

For Britain’s FTSE 100, an additional fillip could finally negate highs broadly encased by the 7534-7476 range of 3^rd October’s spinning top candle. As the last clear bid by the bulls at the time, before a sharp correction, the range marked out a boundary for any recovery. The range will be a critical first step before new highs. Failure to scale these levels raises chances of a slide back to 7370 support, and perhaps the 61.8% (7153) interval of last winter’s decline. A close above 9^th April’s 7478 high would signal the FTSE’s on track.