Article / 08 March 2017 at 8:00 GMT

Morning Markets: Rare China trade deficit bolsters Asian stocks

Consulting editor / TradingFloor
Norway







INDEX AND FX TABLE

 

Watchlist

  • Japan: Second preliminary quarterly GDP estimate (published)
  • Japan: Balance of payments (published)
  • China: Exports, imports, trade balance (published)
  • Germany: Industrial production index (0800 GMT)
  • Spain: Housing price index (0800 GMT)
  • Switzerland: CPI (0815 GMT)
  • Poland: Interest-rate decision (1059 GMT)
  • Brazil: Industrial Production (1100 GMT)
  • Canada: Housing starts (1315 GMT)
  • US: ADP employment report (1315 GMT)
  • US: Revised productivity and costs (1330 GMT)
  • US: EIA weekly petroleum status report, incl. crude oil and gasoline stocks (1530 GMT)

Asian shares pared losses after China posted its first trade deficit since early 2014, as China's imports surged nearly 45% in February in yuan terms from a year earlier, while exports grew by a slower-than-expected 4.2%. 

The jump in China's imports led to a trade deficit of 60.4 billion yuan, which, according to news reports, reinforced the view that Chinese economic activity picked up in the first two months of this year. The offshore yuan (CNH) weakened past its onshore counterpart (CNY) on Wednesday after the Chinese trade data.

Asia-Pacific stocks earlier fell on a negative lead from Wall Street overnight. Asian markets were also rattled by heightened geopolitical tensions ahead of a Wednesday UN Security Council meeting in New York to discuss North Korea's missile launches just as the first parts of a US anti-missile system have arrived in South Korea.

Japan's Nikkei 225 index ended down 0.47%, with the yen rising against the US dollar, while the Shanghai Composite returned to flat -- off just 0.05%.

Before the market open in Europe, German athletic shoe and sportswear maker Adidas raised its sales and profit targets despite posting a fourth-quarter net loss, as sales grew in line with analysts' estimates.

Markets will eye the ADP employment report on Wednesday (1315 GMT) as an advance glimpse of the US labour market before Friday's nonfarm payrolls. Economists project that US companies added 183,000 workers in February, Econoday.com’s consensus forecast for ADP’s estimate showed, according to James Picerno at CapitalSpectator.com.


Market signals

Asian session

  • A negative lead from Wall Street weighed on investor sentiment in Asia
  • Geopolitical risk is growing with arrival of US anti-missile system in South Korea
  • UN urged calm between Malaysia and North Korea over travel restrictions between the two
  • Nikkei 225 ends down 0.45% as yen rose against the dollar, adding to Tuesday's slide
  • Australia's ASX200 ended the day slightly lower
  • Japan's GDP expanded 0.3% in the December quarter
  • Japan had a current account surplus of ¥65.5 billion in January, down 88.9% y/y
  • Beijing plans to slash corporate taxes by $50bn in a bid to boost growth
  • China's ZTE will pay $1.2bn fine for violating US sanctions on Iran, North Korea
  • US trade deficit with China surged 12.8% to $5.47bn in January
  • China's trade balance for February in came in at minus 60.4bn CNY; 172.5bn was expected
  • Brazil has now been in recession for two years, its longest ever downturn
  • There's a 52% chance the Reserve Bank of Australia will hike rates in the next year
  • Gold lost ground on USD strength, driven by expectations of an impending Fed hike

Forex ahead

  • Falling copper prices weighed on AUD; it was worth 0.7596 at 0600 GMT
  • USD was slightly lower ahead of Friday's US jobs report
  • JPY traded at 113.72 against the greenback at 0600 GMT
  • A 6.3% price slide in the dairy trade auction hurt the NZD

From the Floor

Catalyst. ”It seems like the Trump catalyst is running out of steam here [in equity markets],” says Saxo's Garnry. 

Mismatch. "The ADP employment change does not necessarily correlate well with the nonfarm payrolls report," says Saxo's Hardy.

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

1..2..3
Sentiment data for German manufacturing looks solid, and the economy ministry in Berlin says a slump in factory orders in January was probably a temporary setback, says James Picerno.

Gold vulnerable
Precious metals see further selling pressure as the March 15 Fed rate decision looms, and a sharp buildup in speculative gold longs has left it vulnerable, writes Saxo's Ole Hansen.

Paralysis
A plan for a multi-speed European Union, designed to “avoid paralysis”, is more likely to facilitate the EU's demise, says Neil Staines.


Shanghai container port

Wednesday's data showed a big miss with China's February trade data. A jump in imports resulted in a deficit of 60.4bn CNY; 172.5bn was expected. Photo: Shutterstock

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