So far today has been a replica of yesterday, with the crude rout continuing and pushing WTI under $45, but largely ignored by the FX carry pairs, and thus equity futures, which have seen some positive momentum from overnight trade data out of China where exports jumped 9.7% beating the 6% expectation, while imports fell 2.4% compared to a projected 6.2% decline as the trade surplus narrowed from November’s record $54.4 billion.
For the full year, however, Chinese trade grew at just 3.4%, missing the government’s target of 7.5% growth for the third year in a row as the government quick to blame the slowing global economy. In any event, the USDJPY is well off the overnight lows which means the EuroStoxx is up some 0.8% which, just like yesterday, the E-mini is up some 9 points and rising. It remains to be seen if, just like yesterday, US equities will crash at a precipitous pace after the open, once algos realize that nothing at all has changed.
Back to China, the trade numbers pushed the Shanghai Composite Index modestly higher by 0.2%, even if the overall Chinese stock market is massively overbought in recent months, and helped rebound the USDJPY from 117.80, a level not seen since mid December. Then again, China’s GDP print is due for release next wee, and there are rumblings it may miss the government’s target of 7.5%, already the lowest in a century, only for the first time since 1998 when it is expected to print between 7.2% and 7.4%.
As a reminder the Chinese slowdown is the true reason for the collapse in commodity prices – among which crude oil – further demonstrated moments ago Copper plunged by another 2.8%, the biggest daily loss since November, and a move that the pundits can hardly blame on “OPEC oversupply.”
Elsewhere in Asia, JGBs trade higher supported by weakness in Japanese equities although the Nikkei 225 (-0.64%) bounced off worst levels after shedding over 300 points, weighed on by JPY strength and a further fall in oil prices. Other Asian equity markets trade mixed with outperformance observed across the Hang Seng (+0.01%).
And speaking of global slowdown, the 10 Year continues to tell the real story, and has dropped to 1.88% as of this moment, the lowest since October 15 with the 30 Year new record lows! Bloomberg observes that “signs of short covering in Asia†are pushing yields even lower (as expected), with strong volumes in TYH5, eurodollars, according to InTouch Capital Markets managing director David Fuller writes in note. Stops seen in futures space after taking out highs from New York session.
European equities, however, ignore the macro and focus on micro updates, trading higher amid positive broker moves with consumer discretionary stocks leading the advance with ASOS and Morrisons seen up in excess of 5% following pre-market trade updates. However, the continued decline in oil prices continues to weigh on energy stocks resulting in underperformance in Europe once again. In macro news, the Greek Finance Minister Hardouvelis said Greece could stumble out of the Euro by accident if a new government fails to reach an agreement with international creditors soon after this month’s elections. Separately, ECB’s Nowotny, Noyer and Coeure all signal that the ECB are still in discussion over the details of a potential QE program, ahead of their schedule meeting on the 22nd of January.
In the US, Fed’s Lacker (voter, hawk) said labour slack close to being eliminated underscores view that the Fed should raise rates sooner rather than later to keep inflation under control. (RTRS) Fed’s Lockhart (voter, dove) remarked that if data is mixed, prefers later lift-off date and the Fed should be cautious and conservative on rates. (RTRS) Fed’s Williams (voter, dove) said June rate rise ‘reasonable’ amid job gains. (BBG)
