Investors struggle for direction on mixed data

Equity markets put in mixed performances yesterday as investors sifted through the latest batch of economic and corporate reports for signs of recovery.

The day got off to an apparently gloomy start with news that Chinese gross domestic product growth in the first quarter had slowed to its lowest level since records began in 1992.

But most economists took a broadly optimistic view of the figures. “There are signs that the [Chinese] stimulus measures are starting to pay off,” said Jay Bryson at Wachovia. “The Chinese economy probably bottomed in the first quarter and growth should strengthen over the next few quarters.”

But Jonathan Loynes, at Capital Economics, was more cautious. “It seems wishful thinking to conclude, as many are, that China is on the cusp of a rapid rebound,” he said.

“Stabilisation so far is the result of loan-fuelled demand growth – but with officials already concerned that overzealous lending risks stoking asset bubbles and undermining financial sector stability, this will probably not continue.”

There was grim news from the eurozone as industrial production slumped in February – although once again analysts found room for optimism.

“Industrial output is likely to fall at an even faster pace in the first quarter than the record-breaking fall that we saw in the fourth quarter,” said Nick Kounis at Fortis Bank. “However, the pace of contraction should ease significantly in the second quarter as the pace of de-stocking eases and as global demand starts to regain its footing. We should see clearer signs of this in next week's business surveys for the month of April.”

In the US, indications that the housing market might have finally troughed were followed up with news that initial jobless claims had dropped to their lowest level since late January – although continuing claims soared. Meanwhile, the contraction in manufacturing activity in the US mid-Atlantic region slowed this month, according to the Philadelphia Federal Reserve.

“The Philly Fed data definitely play with the grain of other economic numbers that suggest the pace of economic decline is slowing materially,” said Alan Ruskin at RBS.

“Nonetheless, the overall index is still very weak as are most subcomponents even if they have improved substantially from the month before.”

By midday in New York, the S&P 500 had managed to rise 0.2 per cent but the Dow Jones Industrial Average was weaker.

By contrast, the pan- European FTSE Eurofirst 300 index rose 1.6 per cent to close above the 800 level for the first time in two months. In Tokyo, the Nikkei 225 Average inched up 0.1 per cent.