China data and earnings jitters hurting sentiment (ISFM) (20-01-2011)

World markets were affected by the data coming from China today; growth in this country accelerated in December, and investors immediately began worrying that this will cause Chinese authorities to focus again on a policy of monetary tightening to relieve pressure on prices. China has today overtaken Japan gaining the position of second biggest economy.

In Asia, markets came under renewed selling pressure led by Shanghai and Hong Kong stocks, as the need to tighten monetary policy to rein in price pressures becomes more apparent. The data put pressure on more regional shares with financial stocks also declining after the overnight fall on Wall Street following the disappointing earnings from big U.S. banks, including Goldman Sachs Group Inc.

Among currencies, the U.S. dollar lost ground after the Chinese economic data and as optimism grew that European officials are making slow progress on the euro zone’s sovereign-debt woes. The euro was up to $1.3496, from $1.3469 in North American trading Wednesday.

In Europe, stock markets were declining also on worries about further policy tightening in China, with mining and car stocks hurt the worst, though peripheral markets got a boost from hopes that the euro-zone bailout fund could be strengthened.

On Wall Street, the higher than expected earnings reported by Morgan Stanley was not enough to lift sentiment, as stocks fell led by losses in the technology sector and on worries that China's rapid growth may lead to more aggressive measures to tackle inflation.

Source: ISFM