By Geoffrey Smith
Investing.com — China registered record growth in the first quarter, but the numbers were flattered by base effects and fell short of expectations. U.S. bank earnings continue to roll in, with Morgan Stanley (NYSE:MS) in the spotlight after stellar results so far from Wall Street. Housing starts and building permits are expected to have rebounded in March. And Pfizer’s CEO says everyone is going to need booster shots of his vaccine – possibly for years to come. Here’s what you need to know in financial markets on Friday, April 16th.
1. China’s record growth still manages to disappoint
The tyranny of base effects on economic data was in full show overnight, as China posted 18.3% gross domestic product growth on the year in the first quarter. However, the quarterly dynamic slowed, with GDP rising only 0.6% from the previous three months. Both numbers were slightly below expectations.
Monthly indicators were broadly robust, with retail sales and fixed asset investment both outstripping expectations as they caught up with the earlier rebound in industrial production.
Chinese stocks perked up a little, but remain in the doldrums and are down for both the week and the month, amid concerns about defaults in the corporate bond space. The fate of state-owned asset manager Huarong remains the biggest of these after its credit was downgraded by a local agency on Thursday.
2. Can the housing sector match retail?
U.S. data today focuses on the housing market, with March data for housing starts and building permits due at 8:30 AM ET.
Housing starts are expected to have picked up after two straight falls influenced to a large degree by the weather. They remain well short of their 2005 peak, however, and a new study by mortgage agency Freddie Mac (OTC:FMCC) quoted by The Wall Street Journal suggests that the U.S. still has an acute deficit of single-family homes.
Building permits are also expected to have rebounded after falling in February.
At 10 AM ET, the University of Michigan’s consumer sentiment survey for April will be published and is likely to map closely with the surge in retail sales in March as the latest round of stimulus checks reached households.
3. Stocks set to open mixed; Nasdaq record in sight
U.S. stock markets are set to open mixed later after the Dow and S&P pushed to new record highs on Thursday in response to the strong retail sales and jobless claims reports.
By 6:30 AM ET (1030 AM ET), Dow Jones futures were up 54 points, or 0.2%, while S&P 500 futures were up 0.1% and Nasdaq 100 futures were down 0.1%.
The stellar performance of Goldman Sachs (NYSE:GS) and the investment bank arms of its rivals this week means that the pressure is on Morgan Stanley to match them when it reports before the open. PNC Financial (NYSE:PNC), State Street (NYSE:STT), Bank of New York Mellon (NYSE:BK) and Citizens Financial (NYSE:CFG) also report.
4. Annual vaccine booster shots may be needed – Pfizer CEO
People may need to get an annual booster shot of Covid-19 vaccine to keep up their antibody levels, Pfizer (NYSE:PFE) CEO Albert Bourla said.
The comments aren’t radical, but are a reminder that the commercial opportunity for vaccine makers will extend well beyond the crisis phase of the pandemic, which appears to be nearing an end in the U.S.
At a global level, though, infection rates are currently approaching record highs, World Health Organization head Tedros Ghebreyesus said overnight. That’s due to the rampant spread of the disease in Indian and Bangladesh, as well as sustained high rates of new cases in Latin America.
In Europe, meanwhile, German Chancellor Angela Merkel said she hopes to have a new law in place by the end of next week enabling the federal government to impose nationwide controls on business and social life. That comes as new cases hit their highest since the winter surge.
5. Oil hits one-month high
Crude oil is back at its highest in a month as this week’s inventory data combine with rising geopolitical risk to underpin prices.
The sanctions against Russia outlined on Thursday by the U.S. administration may not have been as severe as some feared – there will be no prohibition on holding Russian government debt, for example – but tension is still high, given the mass buildup of Russian troops and armor on the Ukrainian border. In the Middle East, meanwhile, repeated missile launches by rebels in Yemen, aimed at Saudi Arabia, have failed to disrupt oil flows but are a constant reminder of tension between the West and Iran, which is backing the rebels.
By 6:30 AM ET, U.S. crude futures were up 0.2% at $63.58 a barrel, while Brent was up 0.3% at $67.11 a barrel. CFTC positioning data and the Baker Hughes rig count are both due later.