Equity markets were boosted on Wednesday by the China GDP report, along with the continued positive earnings reports. On a day when earnings beats outpaced misses by almost 3-1, Intel and Yahoo were amongst the more notable names that beat expectations.
In the UK, the unemployment rate for February fell to 6.9%, the first time it has fallen below the Bank of England’s original forward guidance for interest rates. The average wage number that was expected to come in at 1.7% came in at 1.4% (excluding bonus payments), remaining below the current rate of inflation. However, wage increases including bonus payments matched inflation for the first time in six years.
China reported Q1 GDP growth of 7.4% year-on-year against expectations of 7.3%. 2014 Q1 growth slowed to 1.5% from 1.8% in Q4 2013. Analysts commenting on the data believe the data showed a modest improvement in March, but the improvement is probably not enough to deliver 7.5% growth in 2014. Frank Investments would suggest anything above 7% for the year would be considered satisfactory.
The macro good news kept coming during the day as US manufacturing output rose for a second straight month in March. Overall industrial production was up 0.7%, beating analyst’s expectations. The better than expected data pushed equities higher, and led to a modest rise in US treasury yields. The Nasdaq index of leading technology shares, boosted by Intel results, rallied off its 200-day moving average.
Things will be quietly winding down in the financial markets for the Easter break, the uncertainty troubles in the Ukraine will continue to impact sentiment, but at least the earnings season appears to be getting off on the right foot.
We continue to live in an era where the FTSE 100 offers a superior real yield to that of the 10-year gilt, and soon the dividend cheques will start to come through the post. I am reminded by a quote that I read in the FT a couple of years ago, apparently made over a century ago by the industrialist and philanthropist John D Rockefeller. “The only thing in life that gave him pleasure was seeing his equity dividends coming in”, hopefully it was not his only pleasure, but it’s certainly something for equity holders to look forward to in the coming months.