GRAPHIC-Take Five: China GDP, earnings and a messy divorce


China's economic recovery accelerated in the third quarter as consumers shook off their coronavirus caution, although the weaker-than-expected headline growth suggested persistent risks for one of the few drivers of global demand.

updates China entry, links with latest data

Oct 19 (Reuters) - 1/ LOOKING TO CHINA

China's economic recovery accelerated in the third quarter as consumers shook off their coronavirus caution, although the weaker-than-expected headline growth suggested persistent risks for one of the few drivers of global demand.

Gross domestic product (GDP) grew 4.9% in July-September year-on-year - slower than forecast by analysts in a Reuters poll but faster than the 3.2% growth in Q2. Though despite the headline disappointment, analysts were encouraged by a broader upturn in consumption and continued factory strength

The yuan CNY=softened on the back of the numbers. The global recovery practically depends on China's recovery, as demand and production in the world's second largest economy keep the world economy ticking over.

A robust reading was expected to support policymakers' prudence, with Tuesday likely to usher in a sixth straight month with China's benchmark interest rate on hold.

-China's economic recovery quickens as consumption returns - Chinese central bank injects 500 bln yuan of medium-term loans, rates unchanged for 6th month


Britain's messy divorce with the European Union is likely to remain in the spotlight, keeping the pound jittery in response to comments from both sides about whether or not a trade deal is likely before a final Dec. 31 deadline.

EU leaders agreed at their Oct. 15-16 summit to more talks but are ready for no deal. The three main areas of contention are fair competition, dispute resolution and fisheries.

The pound could gain from signs the UK will not quit the talks. But the prospect of negotiations dragging on, undermining the economic outlook just as the coronavirus cases rise again, could weigh on sterling.

- UK tells EU: door is ajar so come to us with a few Brexit concessions

- UK PM Johnson says it's time to prepare for a no-trade deal Brexit


Just as tighter European restrictions to contain COVID-19 fuel concern about economic activity, the third-quarter earnings season about to start in earnest may prove a beacon of hope.

According to Refinitiv I/B/E/S data, analysts are increasingly upbeat on earnings from companies listed on the pan-European STOXX 600 index .STOXX.

The expected decline, which peaked at more than 50% during spring when a large part of Europe was under strict lockdown, has softened to an average drop of 36.7% year-on-year, down from a 40% decline forecast a month ago.

There's talk that analyst estimates may be too conservative. The STOXX 600 is currently trading just below the mid-point of the 10-percentage-point range it has held since June. A positive third quarter could push stocks higher.

- Q3 season: Room for positive surprises? L8N2H51ZF

- Daimler posts forecast-beating results


Next week also brings energy-sector earnings. Haliburton HAL reports on Monday, Baker Hughes BKR and Kinder Morgan KMI on Wednesday.

Uneven global growth and ample supply have pressured energy prices during U.S. President Donald Trump's term, with U.S. crude prices CLc1 down around 20% since Trump's January 2017 inauguration. Energy .SPNY is the only major sector in the S&P to be in the red since then.

A November election win for Democratic challenger Joe Biden could bring more unease about greater regulation and an emphasis on green policies.

So, stay away from energy stocks? Perhaps not -- Goldman Sachs does not expect the U.S. election to change its bullish outlook and reckons an overwhelming Democratic victory could be a positive catalyst for the sector.

- How a Biden presidency would transform the U.S. energy landscape

- U.S. election outcome will not impact bullish energy outlook: Goldman


The tone in markets suddenly appears to have echoes of March, when the coronavirus outbreak in Europe sparked a dash into safe-haven bonds and cash.

Increased restrictions to contain a second wave, including in capitals such as London and Paris, are fuelling unease. Safe-haven German 10-year bond yields have tumbled 10 bps to levels last seen in March; and alongside U.S. and UK yields are set for the biggest weekly drop in months.

Investors are now watching for signs of economic damage -- the October flash purchasing manager index numbers for the euro zone are due out Friday.

Not all bond markets will benefit from the jitters. Italian bond yields, which just a few days ago hit record lows on expectations of more central bank stimulus, have been hurt as investors ditch riskier assets. That's what happened in March. Déjà vu, anyone?

- German bond yields fall to lowest since March as COVID cases surge

- New coronavirus infections rise to record highs in U.S. Midwest and beyond

China's recovery attracts capital flows

Sterling remains below pre-Brexit levels

Europe lags U.S. in earnings recovery

S&P 500 sector performance since Trump inauguration

Sense of deja vu in bond markets

(Reporting by Elizabeth Howcroft, Julien Ponthus, Dhara Ranasinghe and Tommy Wilkes in London; Danilo Masoni in Milan, Tom Westbook in Singapore and Rodrigo Campos in New York; editing by Dhara Ranasinghe and Larry King)

((; +442075422684;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics

US Markets


Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at and via Reuters TV.

Learn More