At Last a Better-Than-Forecast Chinese Economic Data Release

January 13, 2016

Financial markets partly retraced recent trends after Chinese trade statistics for December revealed larger-than-anticipated $60.09 billion surplus and much smaller-than-assumed on-year declines in exports and imports.  The surplus in November had declined to $54.10 billion from $60-something results in the three prior months.  Exports fell just 1.4% following year-on-year losses of 6.8% in November and 6.9% in October.  Imports despite lower oil prices dropped 7.6% versus decreases of 8.7% in November, 18.8% in October and 20.4% in September.  Last year’s $594.5 billion trade surplus was about 2% bigger than that in 2014 but didn’t prevent a substantial drop in Chinese reserves due to massive capital outflows.

Market tone was also aided by intervention support from China’s central bank for its currency, which saw the spread between the in-country yuan, which held steady against the dollar, and the offshore yuan narrow sharply. 

In market action, the dollar gave back 0.6%, 0.4% and 0.3% against the Australian, New Zealand and Canadian dollars but rose 0.7% against the Swiss franc and 0.4% relative to the euro, sterling, and yen.  Emerging economy currencies like the ruble, rand and ringgitt have posted gains.

West Texas Intermediate oil ($31.17) rebounded over 2.0% after touching a low for the move yesterday of $29.93 per barrel.

Comex gold is 0.3% softer at $1,083.03.  The 10-year German bund jumped six basis points, but the 10-year Japanese JGB yield slid two basis points, breaking below 0.20% to print at 0.19%.

Share prices in the Pacific Rim 2.9% in Japan, 1.3% in Australia, 1.3% in South Korea, 0.7% in India and Taiwan, 0.9% in Hong Kong and 0.6% in Indonesia and New Zealand.  These gains occurred in spite of a further 2.4% dive in China’s Shanghai Composite index, which moved under 3,000 for the first time since summer.

Stocks in Europe have risen 1.7% in Italy, 1.4% in France, 1.2% in Spain, 1.3% in Switzerland, 1.1% in the U.K. and 0.9% in Germany.  Stocks were also buoyed by Tuesday’s better tone in the U.S. market.

U.S. President Obama’s State of the Union address attempted to take the high road, expressing optimism that America can and will meet difficult challenges of which he defined four:  job security, harnessing inevitable technology for good rather than bad, forging a smarter foreign policy, and making politics work for the people once again.  Reaction to his speech was predictably political, reaping praise from Democrats and ridicule from Republicans.

Richmond Federal Reserve President Lacker played down the threat to the U.S. economy from China’s slowdown and expressed a personal preference for enacting four rate hikes during 2016.  He’s not a voting member of the FOMC this year.

U.S. data released later yesterday showed improvement in the Labor Department’s JOLTS index and the IBD/TIPP optimism index, which ticked up 0.1 to a 3-month high of 47.3.  On tap today is publication of the Fed’s Beige Book of regional economic conditions and prospects.

Industrial production in the eurozone sank 0.7% in November, more than twice the expected decline.  This cut on-year growth in industrial output almost in half to 1.1%, and it left the October-November average a mere 0.1% above the third-quarter level.  A 4.3% plunge in energy paced November’s on-month drop, but production of capital goods, down 1.9%, was also quite weak.

French CPI inflation of 0.2% in December was much as expected.  In the year to December, consumer prices fell 0.9% in Romania and 0.2% in Greece but rose 0.5% in Portugal

In the year to November adjusted for different numbers of working days, industrial output rose 2.6% in Romania and 7.0% in Hungary.

The French current account deficit widened about 300 million euros to EUR 1.4 billion in November.  The Czech current account surplus unexpectedly increased fourfold in November to CZK 12.42 billion instead of swinging to a deficit as forecast.

Sweden’s unadjusted jobless rate unexpectedly ticked up to 4.2% in December from 4.1% in the prior three months.

Japanese on-year M2 money growth slowed to 3.0% in December from 3.3% in November and 4Q and 3.7% in 2015 as a whole.  Japanese bankruptcies posted a 12-month uptick of 1.9% in December in contrast to declines of 8.4% in November and 8.5% in December 2014.

Excluding autos and construction, retail sales in Brazil recorded an on-year decline in November of 7.8%, up from 5.7% in October and the largest 12-month decrease in 152 months.

The monthly U.S. federal budget figures will be reported today, along with the Fed Beige Book and weekly oil inventories.  Central banks are holding interest rate meetings in Peru and Chile.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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