Chinese GDP, Netflix earnings, U.K. unemployment - what's moving markets

© Reuters.

By Peter Nurse 

Investing.com -- China's economic recovery appears on track following the release of stronger than expected growth data. However, investors are awaiting the release of more corporate earnings, including from Netflix, with a degree of caution as they could point to a more financially stressed consumer.

1. China’s recovery on track

Risk sentiment received a boost Tuesday after growth data showed that China’s economic recovery from the slowdown caused in part by its severe COVID restrictions was fully on track.

China’s first quarter GDP grew 4.5% on an annual basis in the first three months of 2023, more than expectations of 4% and the previous quarter’s 2.2% growth.

The recovery appears to be a little uneven, as industrial production grew slightly less than expected in March, but retail sales blew past expectations, surging 10.6% in March against estimates for growth of 7.4%. 

Investors have been banking on growth in the second largest economy in the world to pick up the slack caused by western economies contracting under the weight of aggressive interest rate hikes to combat inflation.

2. Earnings pick up, with Netflix the highlight

There are more significant quarterly earnings for investors to digest Tuesday, including more of the major U.S. banks as well as streaming giant Netflix (NASDAQ:NFLX).

The financial sector has been under scrutiny since March's turmoil and Goldman Sachs (NYSE:GS) and Bank of America (NYSE:BAC) report later in the day, looking to follow in the path of JPMorgan (NYSE:JPM), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC), who all beat Wall Street forecasts.

That said, the sectorial news hasn’t been universally good, with State Street (NYSE:STT) stock falling more than 9% overnight after fee income fell as investors responded to the turbulence by moving their deposits to the largest banks.

Pharma giant Johnson & Johnson (NYSE:JNJ) is also scheduled to report, and analysts will be listening for updates on its proposed settlement of talc-related litigation.

The day’s highlight, however, is likely to come after the close, in the form of quarterly results from streaming giant Netflix. The focus will also be on subscriber numbers, and the company is expected to have added some 2 million subscribers in the first quarter. 

Netflix lost 200,000 subscribers in the year-ago quarter but returned to subscriber growth in the second half of 2022 even if the pace of additions slowed dramatically.

3. Futures edge higher; caution ahead of earnings

U.S. futures edged higher Tuesday, as investors brace for another batch of quarterly earnings, including from the popular streaming platform Netflix [see above].

At 04:00 ET (08:00 GMT), the Dow futures contract had gained 59 points or 0.7%, S&P 500 futures inched up 5 points or 0.3%, and Nasdaq 100 futures added 8 points or 0.0%.

Aside from the corporate sector, investors will also be keeping an eye on the real estate market, with March economic data in the form of housing starts and building permits due.

Investors will also be listening to what an array of Fed officials will be saying in speeches this week, with FOMC member Michelle Bowman scheduled to speak later in the session.

4. U.K. unemployment edges up, pay growth still high

Britain's unemployment rate rose unexpectedly in the three months to February, climbing to 3.8% rather than holding at January’s 3.7%.

This is the highest level since the second quarter of 2022, and suggests that the country’s red-hot labor market may be loosening.

That said, annual pay growth for the three months to February came in at 5.9%, well above the 5.1% forecast, and the same as the revised higher January figure.

This highlights the dilemma facing the Bank of England ahead of May’s rate-setting meeting.

Wednesday sees the release of the official inflation figures for March. They are expected to fall back from February’s 10.4%, but will remain highly elevated. This suggests the BoE will continue to hike rates even with no economic growth last quarter and as unemployment starts to grow.

5. Oil prices retreat despite strong Chinese growth data

Crude prices edged lower Tuesday, handing back some of the recent gains despite stronger than expected economic growth in China [see above], the world’s largest crude importer.

By 04:00 ET, U.S. crude futures were 0.3% lower at $80.59 a barrel, while the Brent contract edged lower by 0.3% to $84.50 per barrel. Both benchmarks are up over 16% this month.

Aside from China’s GDP growth, additional data showed that the country’s refiners processed 63.29 million tons of crude in March, up 8.8% on a yearly basis and the highest ever for that particular month.

The International Energy Agency last week forecast record demand in 2023, largely predicated on the recovery of the Chinese economy after the lifting of its zero-COVID policy.

Elsewhere, the American Petroleum Institute, an industry body, will release its weekly forecast of U.S. crude stocks later in the session, with a drop of around 2.5 million barrels expected.