Markets shored up by China’s 7.5 percent growth

LONDON (AP) — Relief over China’s economic growth rate shored up stock markets Monday despite weaker than anticipated U.S. retail sales figures.

China, the world’s second-largest economy grew 7.5 percent from a year earlier in the second quarter. Though the figure is down on the previous quarter’s 7.7 percent, there had been fears it might fall below 7 percent. A sharp drop would hurt companies around the world that have become increasingly reliant on breakneck Chinese growth to boost earnings.

“Despite the fact that the China growth figure represents an extension of the overall slowing trajectory, being the ninth slowdown in the past ten quarters, equity markets seemed broadly relieved,” said Brenda Kelly, market strategist at IG.

Following a 1 percent rise in the Shanghai Composite Index to 2,059.39, European stock markets posted solid gains. The FTSE 100 index of leading British shares closed up 0.6 percent at 6,586.11, while Germany’s DAX rose 0.3 percent to 8,234.81. The CAC-40 in France ended 0.1 percent higher at 3,878.58.

In the U.S., the Dow Jones industrial average was up 0.1 percent at 15,479, while the broader S&P 500 was steady at 1,680.

Wall Street was not as strong as futures markets had been predicting. That was due to news that U.S. retail sales only grew 0.4 percent in June from the month before. That was half the rate expected and may mean downward revisions to U.S. second quarter growth forecasts. Retail sales account for around 70 percent of U.S. economic activity.

“After today’s report, there is a very real possibility that Q2 GDP will be less than 1 percent for the second time in the last three quarters,” said Dan Greenhaus, chief global strategist at BTIG.

Though the figures suggest the U.S. economy is not growing as quickly as anticipated, they may mean the U.S. Federal Reserve starts reducing its monetary stimulus later. For weeks the Fed’s monetary stance has been the main driver in markets. The Dow and the S&P 500 struck all-time highs last week partly on an indication from the Fed that the monetary stimulus may be in place for longer than previously expected. At the moment, the Fed is buying around $85 billion of assets in the markets, and that’s helped prop up stocks for months.

Some comfort came from forecast-busting earnings from Citigroup. The bank made $1.25 per share during the second quarter, beating the $1.18 per share predicted by analysts polled by FactSet.

It’s a busy week on the U.S. corporate reporting front. Other reports expected this week include Coca-Cola, Goldman Sachs, Johnson & Johnson, Bank of America, Google and Microsoft. General Electric caps off the week Friday.

The dollar has faltered in recent days as expectations of a tightening in the Fed’s policies have eased. It clawed back some ground Monday, with the euro 0.2 percent lower at $1.3037. The dollar was 0.7 percent higher at 100.06 yen.

Earlier in Asia, Hong Kong’s Hang Seng added 0.1 percent to 21,303.31 and Sydney’s S&P/ASX 200 gained 0.1 percent to 4,981.10. South Korea’s Kospi rose 0.3 percent 1,875.16. Japan’s financial markets were closed for a public holiday.

Oil prices gave up some recent gains. Benchmark crude for August delivery was down 97 cents at $104.98 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained $1.04 to $105.95 in New York on Friday, driven higher by continuing tensions in Egypt and a sharp drop in U.S. crude stockpiles.

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