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Top 5 Things to Know in the Market on Friday, 17th January

By Geoffrey Smith -- China's economy grew at the slowest rate in 30 years last year, but markets took solace from signs of a pick up in retail and factory activity at the end of the year. European stocks hit new all-time highs in response, and U.S. markets are set to do likewise (again) when they open later. There's another dump of U.S. data coming down the line today, led by industrial production figures, housing starts and consumer sentiment. Meanwhile, another grim set of retail sales figures in the U.K. strengthened the arguments for an interest rate cut. Here's what you need to know in financial markets on Friday, 17th January.

1. China's growth hits 30-year low but yuan strengthens

China’s economy grew at the slowest pace in 30 years, according to data released overnight. Gross domestic product rose 6.1%, down from 6.2% in 2018, while the annualized rate of growth fell to 6.0% in the fourth quarter.

However, because the development had been long expected, markets zeroed in on a more upbeat set of monthly numbers for December, which all outstripped expectations. Industrial production rose 6.9% on the year, its fastest rate since April, while retail sales growth stayed steady at 8.0%. Growth in fixed asset investment also ticked up from a multi-year low to 5.4%.

While the numbers don’t point to a sharp recovery in the Chinese economy this year, they do appear to add weight to arguments that the worst of the effects of the trade war with the U.S. is over.

The yuan hit another five-month high on the back of the numbers.

2. Stock set to open higher as Europe hits new records

The Chinese data are set to push U.S. stocks to new record highs again on Friday, having already done as much for European stock markets.

By 6:15 AM ET (1115 GMT), Dow futures were up 80 points, or 0.3%, while S&P 500 futures were up 0.2% and Nasdaq 100 futures were up 0.4%.

Earlier, the Euro Stoxx 600 and the German DAX index had both hit a new record high, while the French CAC 40 hit a 12-year high.

After the rush of bank earnings from Wall Street so far this week, earnings season is taking a breather. Meanwhile, Alphabet (NASDAQ:GOOGL) became the fourth U.S. company in history to notch a market value of $1 trillion.

3. U.S. data deluge due

There’s plenty more U.S. economic data due to follow Thursday’s robust readings for retail sales, which nipped in the bud any concerns prompted by Target’s disappointing holiday sales update.

At 8:30 AM ET (1330 GMT), December’s housing starts and building permits data will have the chance to corroborate the NAHB’s survey that showed confidence still close to multi-year highs at the turn of the year.

However, the most important number out later is probably industrial production, due at 9:15 AM along with manufacturing production and capacity utilization rates for December. The JOLTS job opening survey follows and the University of Michigan Consumer Sentiment survey round off the excitement at 10 AM. There’ll also be speeches from Philly Fed President Patrick Harker at 9 AM and banking supervision head Randal Quarles at 12:45 PM.

4. U.K. retail sales strengthen rate cut arguments

The arguments for an interest rate cut in the U.K. gained weight after dismal retail sales figures for December.

Overall sales fell 0.6%, disappointing forecasts for a 0.5% rise. They’ve now fallen for the last five months in a row and for seven out of the last nine months. November’s figure was also revised down.

Money markets are now pricing in a 75% chance of a 25 basis point cut by the Bank of England when its Monetary Policy Council meets at the end of the month. The pound fell.

By contrast, the pressure on the European Central Bank to provide further stimulus eased slightly after figures showed headline eurozone inflation steady, and underlying inflation creeping marginally higher.

5. Treasury to issue 20-year debt

The U.S. Treasury intends to issue 20-year bonds for the first time in 33 years, according to a statement on its issuance plans for the first half of the year.

The new maturity will arguably take some liquidity away from the 10- and 30-year sales, but should not otherwise disrupt the market.

The Treasury said it expects strong demand for a product it last issued in 1986. It will need it, given that the federal budget deficit is running at over $1 trillion a year, its highest in seven years, despite a decade-long economic expansion.

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