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Commodities, Stocks Drop on China GDP Report; Even Bird Flu Has Investors Worried

Daily Ticker

China’s GDP grew at a 7.7% annual rate in the first quarter--less than the 8% economists had forecast--and the news sent gold and global markets tumbling. U.S. markets are down more than 1% in current trading and gold has lost $100 per ounce or 8% of its value. China's Q1 GDP is below the 7.9% growth rate recorded in the fourth quarter of last year has has prompted fears of a global growth slowdown.

The disappointing Chinese GDP report, viewed in the context of slow growth in the U.S., recession in Europe and near zero growth in Japan, is fueling fears that the global recovery is in danger, says The Daily Ticker’s Aaron Task.

It’s also re-igniting concerns about overbuilding in China’s real estate market.

“If the economy is growing only at 7.7% and they’ve built these stockpiles of unneeded stuff, then you could have demand for commodities collapse and the economy could collapse as a result of that,” says The Daily Ticker’s Henry Blodget.

Related: Buy U.S., Sell China? Not for Much Longer

There’s also the perennial issue about whether China’s economic numbers can be trusted.

In addition to worries about China’s growth and real estate bubble are renewed concerns about a bird flu crisis. A new outbreak in China has infected 60 people and killed 13.

The latest outbreak began in Eastern China and has now spread to Beijing in the north and Henan province in central China. Michael O'Leary, head of the World Health Organization’s office in China, told reporters, "Until the source of infection has been identified, it is expected that there will be further cases of human infection with the virus in China."

Related: U.S. and China Need Each Other More Than They Think

So far there’s no evidence that the virus has been transmitted from human to human, only from bird to human. Still, says Task, "there is a big concern that this could spread not just within China but beyond Chinese borders and become a true global pandemic.”

On the other hand, says Blodget, the bird flu could turn out to be like the SARS scare several years ago, which never became the pandemic that was feared.

Maybe so but that’s little solace to David R. Kotok, chairman and chief investment officer of Cumberland Advisors. In a note last week he warned, “Travel from Shanghai to a U.S. city takes only one day. A virus circulates as quickly as any traveler can. Caution is warranted in this modern world.”

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