Better-than-expected Chinese GDP data sent Asian stock markets higher, as investor confidence was boosted by the impressive economic growth, retail sales and industrial production numbers. 

China’s GDP grew at 6.9% in the second quarter, surpassing consensus forecast of 6.8%. This marks a ‘U-shaped’ rebound over the last eight quarters, during which time the growth rate bottomed out at 6.7% in 2016 and since rebounded to 6.9% this year. This demonstrates further stabilisation of the world’s second largest economy.  The recent growth of 6.9% was well ahead of policymakers’ target rate of 6.5% for 2017, allowing more room for deleveraging and reforms. 

Recently, major Asian indices including the Hang Seng, Straits Times, KOSPI, China A50 and India’s Nifty 50 have each broken out above their key resistance levels and headed towards two-year highs. The momentum is strong, backed by improving fundamental elements and capital inflows. A weaker USD was another reason behind surging Asian equity prices, as depreciation of the dollar year-to-date led to capital inflows into these markets.

The STI has broken out above the key resistance level of 3,275, with its next marker the psychological resistance level of 3,300, then 3,400. Looking forward, if earnings were to continue to improve alongside a pick-up in economic growth and a rebound in commodity prices, the Straits Times Index could challenge its 2015 high in the 3,540 area in the second half of this year. 

US equity markets closed flat last night, giving little clue to Asia’s opening this morning. Tonight, investors will be waiting for earnings from Johnson & Johnson, Bank of America, Goldman Sachs and United Continental to paint a clearer picture of future direction.   

The weak US dollar led to a rebound in precious metal prices. The gold price climbed to a two-week high in the S$1,235 area, breaking out the immediate resistance level of $1,230. Similarly, the silver price advanced to the $16.19 area, challenging immediate resistance at this level. 

Technical analysis: Gold - Cash 

  • Breakout above key resistance level $1,230 
  • SuperTrend (10, 2) has flipped upwards, indicating that the long side is taking control again.
  • 10-Day Simple Moving Average is sloped upwards
  • Momentum indicator DMI shows selling force is depleting and long side is gaining momentum 
  • Next resistance level could be found at the $1,250 area

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person