An optimistic week for China, a pessimistic one for the USA. While the former might avoid a recession, the latter is going straight into it.
The third week of April comes to an end with a stop of the S&P 500 rally and the release of China’s GDP data for the first quarter of 2023.
First, here are some numbers to round up the week:
- The S&P 500, after a strong start of the week, ends with -0.20%;
- The Nasdaq and the Dow are sluggish as well, ending with -0.37% and -0.49% respectively;
- In Europe, both the London LSE and the German DAX are stable, ending the week with +0.54% for the LSE and -0.038% for the DAX index.
- Milan has had one of the worst performances of the week, ending with -1.12% weekly despite a small +0.43% rebound on Friday.
China’s GDP
By far the biggest market news this week has been the release of GDP data by the People’s Republic of China.
The dragon is back with a +4.5% growth in the first quarter of the year, exceeding expectations by half a percentage point.
This growth is clearly linked to the end of the zero-Covid policy, which gripped the Chinese economy until December 2022. China was the last developed economy to keep lockdowns and strict restrictions last year, with megalopolis like Shanghai completely closed down while the rest of the world had moved on.
Though, this might have been incredible timing for China. Such serious economic growth contrasts fears of recession in the rest of the world. While the United States and Europe will most likely experience a recession this year, China might avoid it.
The end of the S&P 500 rally
American stocks were experiencing a good first half of April.
After the massive scare from last month, when a banking crisis seemed to be coming, American stocks relaxed looking at a seemingly calmer market.
The collapse of Silicon Valley Bank and Signature Bank prompted the American Federal Reserve to pour trillions of dollars into the economy. This measure was necessary to save banks after a year of relentless interest rate hikes.
With the new inflow of cash, stocks seemed optimistic and started rising again.
On Tuesday, however, Citigroup revealed that the Federal Reserve might pull out up to $800 billion from the economy. Citigroup strategist Matt King said that he expects markets to lose momentum.
And indeed, as we saw, the S&P 500 actually stopped its rally this week, as fears started settling down again on the markets.
