US stocks traded at record levels and those in Europe hit a fresh high on Friday after Chinese growth figures reassured investors over the relative health of the world’s second-largest economy.
The region-wide Stoxx Europe 600 index rose 1 per cent for its fourth straight day of gains. Paris’s CAC 40 climbed 1 per cent, while Frankfurt’s trade sensitive Xetra Dax was 0.7 per cent higher.
Wall Street reached fresh peaks, with the S&P 500 up 0.2 per cent, a day after the index closed above 3,300 for the first time, boosted by technology and financial stocks. On Friday, 10 of 11 S&P 500 sectors were in positive territory, led by communication services and utilities.
The rally received support from a preliminary survey showing consumer sentiment held relatively steady in January at strong levels, while the rate of new home construction accelerated to its highest level in 13 years.
In other US data, manufacturing output improved month-to-month in December, despite forecasts for a decline. A drop in heating demand weighed on overall industrial production, which fell 0.3 per cent. The report comes on the heels of an upbeat readings on manufacturing activity on the east coast.
“The latest surveys suggest that the tentative recovery in manufacturing output is a sign of things to come in 2020,” said Andrew Hunter, senior US economist at Capital Economics.
The benchmark S&P 500 set a pace for its strongest weekly performance since August, aided this week by optimism over the US-China trade pact.
Across the Atlantic, UK government bonds rallied and sterling slipped following the release of weak consumer data. Britain’s retail sector contracted in December, marking the longest spell of no growth since records began in 1957 and adding to pressure on the Bank of England to cut interest rates.
The disappointing data swiftly sent the pound 0.6 per cent lower against the dollar to $1.3025. By the afternoon, sterling was still down 0.4 per cent while the yield on the 10-year gilt slipped 0.3 basis points to 0.629 per cent.
Signs that the Bank of England is poised to cut rates also sent the pound tumbling earlier this week, falling below the $1.30 for the first time in 2020.
The weakness in sterling helped London’s FTSE 100, with its global-facing companies, rise to its highest level since late July 2019. London’s blue-chip index is well placed to benefit from a softer pound as the bulk of its revenue is earned abroad.
The MSCI world index also hit highs, gaining 0.6 per cent as risk-on sentiment continued to permeate global markets in the aftermath of the reduced tensions between the US and China.
China’s gross domestic product grew 6.1 per cent in 2019, data earlier on Friday showed, hitting analysts’ expectations but also revealing the economy grew at its lowest rate since 1990.
Still, analysts noted that growth picked up last month, helping to avert a further slowdown in the fourth quarter.
Robert Carnell, chief economist for Asia-Pacific at ING, said the numbers suggested the economy had stabilised “following exhaustive efforts by the government and central bank”.
“That job isn’t over, and the external backdrop is still very challenging.”
Asian markets also rose following the data release, with Hong Kong’s Hang Seng closing up 0.6 per cent and China’s blue-chip CSI 300 rising 0.1 per cent. The Chinese benchmark index has gained 8.5 per cent since the beginning of December, fuelled in part by improving trade relations with the US. The renminbi strengthened to a six-month high.
Gold, a safehaven asset, gained 0.4 per cent at the end of the week. Brent crude was up 0.3 per cent, in its second consecutive day of gains.
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