Associated Press points out that China is getting closer to overtaking the US as the world’s largest economy, in its take on today’s GDP figures.

China’s quick recovery brought it closer to matching the United States in economic output.

Total activity in 2020 was 102 trillion yuan ($15.6 trillion), according to the government. That is about 75% the size of the $20.8 trillion forecast by the IMF for the U.S. economy, which is expected to shrink by 4.3% from 2019. The IMF estimates China will be about 90% of the size of the U.S. economy by 2025, though with more than four times as many people average income will be lower.

AP also flags up that China’s exporters managed to ship more to the rest of the world last year, while consumer spending was less robust:

Exports rose 3.6% last year despite the tariff war with Washington. Exporters took market share from foreign competitors that still faced anti-virus restrictions.

Retail spending contracted by 3.9% over 2019 but gained 4.6% in December over a year earlier as demand revived. Consumer spending recovered to above the previous year’s levels in the quarter ending in September.

Online sales of consumer goods rose 14.8% as millions of families who were ordered to stay home shifted to buying groceries and clothing on the internet.

Factory output rose 2.8% over 2019. Activity accelerated toward the end of the year. Production rose 7.3% in December.

Anxiety over tightening Covid-19 lockdowns are weighing on investors today, reports David Madden of CMC Markets:

The British government has closed the air corridors, so passengers arriving from outside the UK will need to show proof of a negative Covid-19 test as well as self-isolating once they arrive in the country. Last week, Portugal implemented harsher restrictions, France introduced a curfew from 6pm and it was reported the Berlin administration is also contemplating a curfew. China’s localised lockdowns are increasing too. Tighter restrictions should lead to even worse economic pain that is being inflicted by the lockdowns.

Dr Michael Ryan, the WHO emergencies chief, cautioned the coronavirus will claim 100,000 lives per week ‘very soon’. Governments won’t want to be presiding over such numbers so it is likely that things will get worse before they get better on the lockdown front. The timing of the update from Dr Ryan is bad, as the distribution of the vaccine will be slowed down due to supply constraints.

Back in the markets, the FTSE 100 is still down around 0.3% today at 6716 points (down 19 points today).

With Wall Street closed for Martin Luther King Jr. Day, investors are remaining cautious ahead of a busy week, including the US presidential inauguration on Wednesday.

Craig Erlam of OANDA explains:

With Joe Biden assuming the Presidency in two days, the new administration will seek to get to work quickly on its proposed $1.9 trillion stimulus package, the outcome of which could determine the path of travel for stock and bond markets. With such a slender majority in the Senate, Biden may be forced into compromise if he wants to get this over the line which may not be a massive blow in either case, depending on where that comes.

With vaccines being rolled out and the end of the nightmare in sight, countries around the world are turning their focus to the recovery. China is already well ahead in this regard, with data this morning showing just how far ahead they are.

The country grew 6.9% quarter on year, taking 2020 growth to 2.3%, which is not bad at all under the circumstances. Strong demand for exports is supporting the ongoing rebound in China, the only major economy to be enjoying any growth. Obviously there’s still a long way to go for the country to get back to where it wants to be, with consumption and debt a focus once again but under the circumstances, policy makers will be relieved.

The head of the International Monetary Fund, Kristalina Georgieva, has warned that there is still a ‘high degree of uncertainty’ about the global economic outlook.

Georgieva also warned that countries must not withdraw their fiscal support too early (a nudge to finance ministers not to cut spending, even though debt levels are rising).

Georgieva was speaking at a digital press conference with a Swedish finance minister Magdalena Andersson, the new chair of the IMF’s steering committee.

Reuters has more details:

Andersson...told reporters it was clear the need for liquidity remained great, and she would consult with member countries on options for expanding liquidity.

Metal prices have risen today after China reported faster growth than forecast for 2020.

The three-month benchmark copper contract rose 0.4% in London to $7,984 per tonnes, as traders anticipated solid demand this year.

Independent analyst Robin Bhar explained (via Reuters):

“The China data was pretty robust, not any great surprises there but just confirmation that China is back on track and that is a solid underpinning for metals.”

In China, the most-active May contract for iron ore on China’s Dalian Commodity Exchange rose by up to 2.5% to 1,084.50 yuan ($167.29) a tonne, its strongest since December 22.

In the Republic of Ireland, the number of people claiming jobless benefits because of the pandemic has jumped by 15% in a week.

Nearly 460,000 people received the Pandemic Unemployment Payment this week, new government figures show. That’s an increase of 61,715 on the previous week, the Department of Social Protection reports.

The jump in Pandemic Unemployment Payments came after Ireland’s government announced tougher Covid-19 restrictions, meaning non-essential shops and some construction sites had to close.

The Department of Social Protection explains:

The sector with the highest number of people receiving PUP this week is Accommodation and Food Service activities (110,351). This is followed by Wholesale and Retail Trade (73,382) and Construction (56,217).

The sector that has seen the largest increase this week is Construction with 56,217 people receiving a PUP payment tomorrow. This has increased from 32,152 recipients last week which is attributed to the Level 5 restrictions imposed on the sector on the evening of Friday, 9th January.

Germany’s central bank has warned that its economy would suffer a “sizeable setback” if coronavirus curbs are extended again.

In its latest monthly report, the Bundesbank said.

“If infections failed to ease significantly and current restrictions on economic activity were to persist or even be tightened, there could be a sizeable setback.”

Chancellor Angela Merkel is due to meet with the leaders of Germany’s 16 federal states on Tuesday, and will reportedly push for tighter measures - which could include curfews.

The Bundesbank also predicted that Germany’s inflation rate is likely to turn positive this month, following falling for several months following a temporary VAT cut.

Back to China... and Matthew Cady, Investment Strategist at Brooks Macdonald, says China achieved “a very strong end to the year”, growing at a faster rate than before the COVID-19 pandemic hit.

China’s rebound from the COVID-19 pandemic has continued to be quicker and stronger than many forecasters had expected during Q4.

Following the impact from the virus in Q1 last year, the strength of the economic recovery in the subsequent three quarters of 2020 has been nothing short of remarkable. The pace and scale of the improvement reflects a very effective public health and broader economic policy response, led by China.

Coming in to 2021, we already held a conviction overweight to Asia ex-Japan equities, and last week, we extended this overweight further, in particular to add to our cyclical exposures in the region. Today’s strong economic figures help to underscore our continued positive outlook to the Asia ex Japan region.

The US dollar has touched a one-month high today, shaking off some of its recent weakness.

The greenback strengthened following a Wall Street Journal report that nominated-Treasury secretary Janet Yellen will tell a Senate confirmation hearing that the United States does not seek a weaker dollar.

Yellen is expected to pledge that the Biden administration will remain commited to market-determined exchange rates, saying:

“The United States doesn’t seek a weaker currency to gain competitive advantage.

“We should oppose attempts by other countries to do so.”

Late last year the dollar sank to its lowest level since April 2018, driven by predictions of more US stimulus programmes and optimism about the global recovery (making riskier assets more attractive).

Today, though, the pound has fallen to a one-week low against the US dollar (at $1.355), while the euro is trading at a five- week low (at $1.206).

Michael Pettis, finance professor at Peking University, has written an interesting thread about China’s GDP figures.

He explains how Beijing’s stimulus push has pumped up ‘unhealthy, non-productive’ areas of the economy which it had previously tried to curb, making China more unbalanced than before the pandemic:

China’s forecast-beating growth hasn’t stirred much excitement in Europe’s stock markets.

The Europe-wide Stoxx 600 is flat this morning, with anxiety over the Covid-19 pandemic tempering optimism about the prospect of an economic revival.

In Germany, health minister Jens Spahn warned that more needs to be done to bring it permanently under control.

Spahn told broadcaster ARD that:

“The (infection) numbers seem to be decreasing, which is good, but we are still a long way from where we want to be.”

Mihir Kapadia, CEO of Sun Global Investments, says:

“The very strong rally enjoyed across the global stock markets now appears to be running out of steam as rising Covid-19 infections have hit sentiment hard on Monday.

In addition to the higher infection rates, with more lockdown restrictions in place, stocks have been hit by other factors such as lowered consumer spending and is unlikely to improve during the first quarter of this year.

However, we could expect markets to pick up again soon following the positive developments from China, with the country’s economy defying forecasts by recording growth of 6.5% at the end of 2020. This is higher than the predicted 6.1%.

This will certainly help sentiment if its growth rates remain strong as it is a sign that the economic recovery is on track, however it is important to consider that Chinese exports are now more expensive, while its continued trade tensions with the US are unlikely to ease anytime soon, meaning that we could expect gains to remain capped until we see similar positive economic data take place elsewhere.”

Music news: British songwriter and producer Ian Levine has sold his rights to a string of smash hits by pop group Take That.

The deal covers producer royalties to tracks from the group’s 1992 debut album Take That & Party – which was certified platinum twice in the UK – including A Million Love Songs, Could It Be Magic and I Found Heaven.

Music publisher One Media iP Group has also snapped up Levine’s rights to two other recorded Take That tracks that have never been released. One Media iP did not disclose the cost, saying only that it had acquired the rights for a “modest consideration”.

Levine is the latest musician to sell his rights to investors who are on the hunt for hits that can bring in extra revenue in the new streaming era. Artists including Shakira and Fleetwood Mac members Mick Fleetwood and Stevie Nicks have also cashed in on their back catalogues, selling rights to companies including Primary Wave, Hipgnosis and BMG.

More here:

Shares in supermarket giant Carrefour have dropped 6% after the French government firmly rebuffed a takeover offer from Canada’s Alimentation Couche-Tard.

Paris has traditionally taken a firmer line on takeover bids than the UK (where a series of leading companies have been sold off over the years - from chemicals giant ICI and glassmaker Pilkington to chipmaker ARM and chocolate firm Cadbury).

And the prospect of Carrefour’s bulging wine racks and comptoir de fromages falling into foreign hands has prompted a firm “Non” from the French government, saying it would threaten food security.

Couche-Tard had promised fresh investment and no job cuts for at least two years. But France’s finance minister Bruno Le Maire was unwavering, and declared on Friday that:

“My answer is extremely clear: we are not in favour of the deal

The no is polite but it’s a clear and final no.”

The two sides have now broken off merger talks, although they hope to “examine opportunities for operational partnerships”.

Shares in Carrefour have dropped from €16.70 to €15.60, roughly their level before Couche-Tard made its approach last week.

China’s stock market has rallied after today’s growth figures were released, with the CSI 300 closing 1.1% higher, at 5518.

That lifts the index back towards the 13-year high set last week.

Julian Evans-Pritchard, senior China economist at Capital Economics, says:

“Despite the latest dip in retail sales, we see plenty of upside to consumption as households run down the excess savings they accumulated last year.

“Meanwhile, the tailwinds from last year’s stimulus should keep industry and construction strong for a while longer.”