CNBC Daily Open: China Reported an Economic Boom

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China's economy boomed in the first three months of the year. In the U.S., regional banks' earnings reports weren't a disaster, but neither were they a picture of health.

What you need to know today

• China reported its first-quarter gross domestic product popped 4.5% from a year earlier, more than economists' expectation of 4% and the highest since the first quarter of 2022. Retail sales, a key engine of China's growth, surged 10.6% in March.

• U.S. stocks rose Monday amid mixed results from regional banks. Asia-Pacific markets traded mixed Tuesday. China's Shanghai Composite inched up 0.12% and Hong Kong's Hang Seng Index lost 0.72% despite China reporting it beat economic growth estimates handily.

• Markets expect the Federal Reserve to continue hiking rates at its next meeting, but central banks in Asia-Pacific are already hitting the brakes on rate increases — and some might even start cutting rates this year.

• Samsung is reportedly considering switching from Google to Microsoft's Bing as the default search engine on its phone. If the South Korean conglomerate carries through on its plan, Alphabet, Google's parent, could lose billions of dollars in advertising. Alphabet sank 2.66% on the news.

• PRO Higher interest rates helped big U.S. banks reap huge profits and revenue. But they're hurting smaller banks like State Street, which fell short of earnings expectations. Here's why rates affect those banks' revenue differently.

The bottom line

China's economy is rebounding on multiple fronts, according to data released Tuesday by the country's National Bureau of Statistics. Last month, gross domestic product shot up, retail sales boomed, industrial output rose and fixed asset investment climbed.

Admittedly, some of those figures were lower than expected. Real estate investment declined, indicating China's property sector is still a weak point in the country's economy. Detractors can also point to China's lower-than-expected 0.7% rise in March's consumer price index, year on year, as a sign that consumption might not be as robust as retail sales suggest.

Indeed, the tepid reactions of stock markets on the mainland and in Hong Kong reinforce the idea that the red-hot numbers aren't as significant as they initially seem.

Meanwhile, regional banks in the U.S. began reporting results Monday. It wasn't the disaster many had feared, but it didn't paint a picture of health in the sector, either.

First, the good news. Charles Schwab's first-quarter net income rose 14% from a year ago to $1.6 billion, while its revenue increased 10% to $5.12 billion. Its revenue didn't reach Wall Street's estimate, but it's pretty remarkable the bank (which also functions as a brokerage) managed to increase its profit despite being one of the hardest-hit financial institutions amid SVB's collapse. Investors thought so too, pushing Charles Schwab shares 3.94% higher.

M&T Bank, a bank with assets of $201 billion (as of 2022), posted even better results. It beat first-quarter expectations on both the top and bottom lines, causing its stock to surge 7.78%.

But other banks didn't fare as well. State Street, which is a custodian bank that holds financial assets like stocks and bonds, saw a 5% decline in first-quarter net income, to $549 million, even though its total revenue rose. The report made investors unload State Street stock, which plunged 9.18%.

Bank of New York Mellon, another large custody bank, sank 4.59% after State Street posted its earnings.

Earnings aside, all banks that reported Monday revealed a drop in deposits. Those at State Street and M&T shrank about 3%, while Charles Schwab saw an 11% drop in deposits from the prior quarter. However, when juxtaposed against the banks' stock movement, it seems investors were more concerned about profitability than the size of deposits, which could be a promising signal that it's back to business as usual in the sector.

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