World shares mixed as China sees surge in industrial output, retail sales

Shares have risen in Europe after a mixed session in Asia as China reported a variety of data that painted a complicated picture of its recovery from the pandemic.

The passage of a $1.9 trillion aid package for the US economy has added to investor confidence that the US and global economy will likely experience a strong recovery from the pandemic in the second half of the year but also potentially increase the rate of inflation.

Markets got a mixed message from the data out of China on Monday, which has led the global recovery, reopening earlier than other countries from coronavirus shut-downs that emerged in the central city of Wuhan in early 2020.

Retail sales jumped nearly 36 percent year-on-year in January-February from a year earlier. 

But the surge was mostly driven by strong demand for cars, catering and jewelry, suggesting Chinese consumers were splashing out during the Lunar New Year, ING economists said in a report.

The data were exaggerated by low base effects from the shutdowns last year, they said.

Industrial output in the first two months was up almost 17 percent from the corresponding period in 2019, authorities said.

"We expect activity to remain strong in the near-term, as the easing of virus restrictions boosts consumption and fiscal stimulus among key trading partners should keep exports strong," said Capital Economics senior China economist Julian Evans-Pritchard.

Jobless rate rises

Meanwhile, the jobless rate rose to 5.5 percent from 5.2 percent a year earlier, possibly affected by flare ups of coronavirus in some areas, analysts said.

"Travel restrictions weighed on retail sales but boosted industrial output and investment. We think activity will remain strong during the first half of this year, before giving way to a weaker second half," Evans-Pritchard of Capital Economics said in a commentary.

"Domestic policy support is being gradually withdrawn. And foreign demand for Chinese goods will drop back as vaccines start to reverse the recent shift in global consumption patterns," he said.

READ MORE: OECD: ‘A global economic recovery is in sight’

Fed policy review

Investors will be watching this week for the outcome of a Federal Reserve policy meeting, which wraps up on Wednesday. 

Japan's central bank will be issuing a policy update on Friday.

The bond market again was the dominant force in pulling tech stocks mostly downward, because as yields push interest rates higher, they make high-flying stocks look expensive.

After remaining stable for most of the week, the yield on the 10-year Treasury note jumped to 1.62% from 1.52% a day earlier. 

Investors had sold off stocks late last week after that yield crossed above the 1.60% mark. 

On Monday, the 10-year Treasury was at 1.61%.

READ MORE: Biden proposes $1.9 trillion for pandemic-hit economy

Inflation in US

The increase in bond yields came as President Joe Biden signed into law the $1.9 trillion stimulus plan, which will include $1,400 checks for most Americans and additional payments for those with children or those who collected unemployment benefits last year. 

President Biden also laid out a plan, in a primetime speech Thursday, to expand vaccine eligibility to all Americans by May 1.

Some economists fear that inflation, which has been dormant over the past decade, could nudge higher under the extra demand generated by the stimulus package. 

Others disagree, given that there are 9.5 million fewer jobs in the American economy than there were before the pandemic hit a year ago. 

They contend that unemployment will keep a lid on inflation.