This risk rally is not going to give up the fight easily as it called in reinforcements in the form of Chinese GDP and an earnings season that continues to surprise to the upside.

According to news reports out of China, and confirmed overnight, Chinese GDP grew at a rate of 7.9% in Q2. This is mainly due to a surge in bank lending and a 4 trillion yuan stimulus package that has seen the Chinese central bank print 3 times as much money as the US to fight this downturn. Given that, according to IMF data, China accounted for a third of global growth last year a good figure for China is a good figure for the world’s economy.

In the world of earnings, American companies continue to outperform analyst expectations. Yum! Brands, owners of Pizza Hut, Taco Bell and KFC, earned $303 million in Q2 versus expectations of $224 million. Intel, Abbott Labs and Altera all helped risk higher.

Data from the UK was poor however yesterday and hence GBP has not been able to cpaitalise on this risk happy rally. Unemployment in the UK has risen to its highest level since 1995 although at the fastest pace since 1971. The unemployment rate currently stands at 7.6% which although high compares favourably with the US and Europe who both sit at 9.5%.

One thing that has happened overnight which has overshadowed the risk rally is that New Zealand has had its rating outlook cut to negative by Fitch as the ratings agency said they were worried about the size of the nation’s current account deficit. NZD has lost ground against most currencies apart from, naturally, GBP.

Data is fairly quiet today with only initial jobless claims and Philly Fed to be aware of. On the earnings front heavyweights such as Nokia, JP Morgan, Google and Novartis will move the market today.

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