Financial market research and analysis

Asian markets traded mixed despite Chinese data easily beating expectations and fears over the health of the Chinese economy fading.

China’s economy grew at 6.4% in the first quarter of the year, above the 6.3% forecast, whilst matching growth seen in the last 3 months of 2018. Importantly industrial output surged 8.5% in March year on year, smashing expectations of a 5.9% increase. Retail sales for China also impressed at 8.7%. The better than forecast figures show that policy makers in China managed to sustain growth in the clearest indication yet that pro-growth policies such as tax cuts, implemented by Beijing are working.

Investors reacted immediately to the stronger than forecast data by buying up the Aussie dollar, which is often considered a liquid proxy for China. The AUD/USD hit a 2-month peak $0.7206.

This is just the latest in a string of recent Chinese data that has surprised to the upside, indicating that policy implemented by Beijing at the end of last year could finally be bearing fruit. Concerns over the health of the Chinese economy will start to fade following the recent impressive run in data. An improvement in the Chinese economy was a necessary requirement for an improvement in the health of the global economic outlook.

Whilst the Aussie dollar moved higher, equity indices were more muted in their reaction, with some stock indices turning southwards. In the commodities market, the general improvement in sentiment saw gold decline $1276.61 its lowest price so far this year.

Netflix forward guidance unnerves

Netflix shares fell after hours despite a solid earnings report. Netflix beat expectations on both top and bottom lines last quarter, whilst forward guidance on subscribers also beat expectations. However, investors were far from impressed by the EPS Netflix predicts in the second quarter, which at 55c is well below the $1 per share that analysts had pencilled in.

Netflix reported adding 9.6 million users in the quarter, beating the 8.8 million forecast. However, subscriber estimates for the second quarter are less encouraging at just 5 million. A decline from a year earlier owing partially to the price increases. Netflix is the first FANG to report and has come up short of what market participants were hoping for in its outlook.

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