Market update: Surprise fall in Chinese growth weighs on markets

Source: Henderson Global Investors

The Dow Jones closed flat on Friday, while the S&P 500 finished 0.3% lower. Several US economic indicators disappointed, with March retail sales shrinking 0.4% and Thomson Reuters/University of Michigan's preliminary consumer sentiment index reading falling to a nine-month low, fuelling fears of a slowdown in the US economy. On a brighter note, financials JP Morgan and Wells Fargo outperformed their first quarter earnings estimates.

The focus this morning is news that China’s economy grew less than expected in Q1 2013. Driven mainly by weakness in industrial production, gross domestic product (GDP) expanded by 7.7% vs 7.9% in the previous quarter, below most analyst forecasts. Additionally, retail sales rose by 12.6% in the first quarter, slower than the previous period. Following the news, the Shanghai Composite fell 1.1% and the Hang Seng closed down 1.4%. Commodities are also weakening, with gold, oil and copper the notable underperformers. On Monday, the World Bank revised its 2013 growth forecasts for developing Asian economies downwards, though it did note that the Bank of Japan’s monetary policies should be supportive.

European equities continue to fall this morning; the weak Chinese economic data is causing mining stocks to be out of favour (FTSE Eurofirst 300 -0.8%, FTSE 100 -1.0% at the time of writing).