Global Stocks Rebound As Fears Of Chinese Hard-Landing Pushed Back On Strong Trade Data
After two months of sharp currency devaluation, the market was carefully watching last night's China trade data to see if the Yuan debasement had led to a positive trade outcome to the world's second largest economy, and as reported last night, it was not disappointed when China reported a December trade surplus of $60.09 billion from $54.1 billion in November, as a result of exports beating expectations and rising 2.3%, the first increase since June, while imports declined by just 4%, the smallest drop since 2014 despite China importing a record amount of oil, or 33.2 million tons, ostensibly to take advantage of low oil prices and fill up its strategic petroleum reserves.
“The market was pricing a hard-landing in China and with the latest trade data and the central bank’s effort to prop up the currency, those fears seem to have been overblown,” Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen, told Bloomberg. “Now we’re probably going to see the market go the other way. Stocks that have taken the biggest hit are those related to energy. It makes sense that they rebound the most.”
Naturally, this being China, one can be confident that the true data has been dramatically "massaged", something promptly suggested by Guosen Securities which said the December trade balance improvement came with big drop in FX reserves, indicating some "fake trades" for arbitrage purposes.
However, for now the market is happy that not only has China managed to fully dominate the offshore Yuan market where it can now control liquidity, and thus pricing, at will, but also released a favorable trade report, and as a result risk assets across the globe, as well as commodities, are solidly bid as seen below.
Market Wrap
- S&P 500 futures up 0.6% to 1937
- FTSE 100 up 1.1% to 5995
- DAX up 1.3% to 10112
- German 10Yr yield up 6bps to 0.59%
- Italian 10Yr yield down 2bps to 1.59%
- Spanish 10Yr yield down 3bps to 1.8%
- MSCI Asia Pacific up 1.9% to 123
- Nikkei 225 up 2.9% to 17716
- Hang Seng up 1.1% to 19935
- Shanghai Composite down 2.4% to 2950
- US 10-yr yield up 3bps to 2.14%
- Dollar Index up 0.26% to 99.23
- WTI Crude futures up 2.4% to $31.18
- Brent Futures up 2.5% to $31.63
- Gold spot down 0.5% to $1,081
- Silver spot up 0.3% to $13.82
European shares advanced for a second day and Asian stocks rebounded from a three-year low, while Emerging-market equities rose the most in three following a sharp selloff to start the year which erased more than $5 trillion from global equity values.
Asian stocks rose for the first time in 2016, ending a 7-day stretch of declines, the longest since August. The MSCI Asia Pacific Index jumped as much as 2.1 percent while Japan's the Nikkei, after wiping out all of its gains for 2015, was up 2.9% overnight its best gain in 4 months, although curiously it was China's own Shanghai Composite which after rising 1.2% before closing down 2.4%, below 3,000 for the first time since mid-2015, as hopes of an aggressive market stimulus fade.
Elsewhere, the Bloomberg Commodity Index, a gauge of returns on raw materials that touched its lowest level on record on Tuesday, rose as U.S. oil futures halted the longest run of losses in 18 months: crude oil's bounce from below $30 has helped the gauge. Yesterday it fell as low as $29.93, a level not seen since November 2003. Citigroup says the world is now "confronting $20 oil." The Bloomberg Commodities Index has sunk 5 percent in 2016, heading for a sixth year of declines, a record losing streak. The gain buoyed the ruble, which climbed for the first time in five days, and the rand. Bonds fell amid sales in the U.S. and Europe.
Looking at regional markets, starting with Asia stocks here traded higher following the positive close on Wall St. as stock markets rebounded from the recent slump, with sentiment supported by better than expected Chinese trade data, whilst the CNH overnight interbank rate fell to 8.3%. ASX 200 (+1.3%) was lifted by the energy sector amid bargain buying as crude prices recovered having briefly declined below USD 30/bbl for the 1st time since 2003, while the Nikkei 225 (+2.9%) outperformed with broad based gains as exporters were underpinned by a weaker JPY. Hang Seng (+2.3%) led by gains in casino names, while the Shanghai Comp (-2.4%) initially benefited following encouraging trade figures where Chinese exports posted an unexpected increase, but then sold off towards the end of session. 10yr JGBs gained despite increased demand for riskier assets, with support seen following a well-received 10yr inflation-linked bond auction which saw an increase in b/c and with only 21 % of the issuance allocated at the lowest prices vs. Prev. 97%.
Top Asian News
- China Trade Surplus Swells as Exports Rise in Boost for Yuan: Nation’s Dec. trade surplus $60.09b vs est. $51.3b surplus
- Offshore Yuan Set for Record Five-Day Gain as China Curbs Supply: Regulator said to ask onshore lenders to limit outflows
- Hong Kong’s Leung to Lift Public Housing as Prices too High: Govt 5-yr target raised to 97,100 new homes
- Sumitomo Withdraws Forecasts After 77 Billion Yen Charge: Warns that further impairments are possible after slump
- Rajan to Staff: Read, Get Tough, Send Press Releases Earlier: Calls for debate on “protectionist attitudes”
Commodities appear to be guiding much of the European equity sentiment once again today with equities residing in a sea of green today (Euro Stoxx: +1.6%) as energy and material names lead the way higher. This comes amid a rebound, albeit a relatively modest one, in the commodity complex, whereby WTI resides in positive territory bouncing back above USD 30/bbl after a brief break overnight.
In line with the upside seen in equities, Bunds did see initial weakness today, however it is worth noting that Bunds have come off their worst levels heading into the North American crossover and trade relatively flat on the day, despite a technically uncovered Bund auction. Whilst also of note, 2s/10s have been in a fairly tight range all week however the Bund swap spread has tightened today alongside the supply due out today, including the Belgian 10Y syndication as well as supply out of Italy.
Top European News
- Telefonica to Pay $2.61b for Spanish Soccer Rights: Provides co.’s pay-TV service sports telecasts its competitors already have
- Aegon Plans $432m Share Buyback, Cost Cutting in U.S.: Seeks return on equity of 10%
- CGG to Sell New Shares at 72% Discount to Fund Turnaround Plan: Oil surveyor seeks EU350m in sale ending Jan. 27
- Shire Will Continue Seeking M&A, Business Development Opportunities: Shire’s next transactions likely to be smaller
- Sainsbury Holiday Sales Meet Estimates on Non-Food Revenue: Forecasts improvement in second-half results
In FX, the yuan strengthened in Hong Kong’s offshore market, headed for the biggest five-day advance on record after China intervened to support the currency. In Shanghai, it was little changed. The central bank kept its yuan reference rate almost unchanged for the fourth day in a row, helping calm investor nerves after an eight-day run of weaker fixings through Jan. 7 heightened concern about the severity of a slowdown in the world’s second-biggest economy.
Japan’s currency, which has benefited from demand for haven assets this year, dropped 0.6 percent to 118.30 per dollar. High-yielding currencies gained, with the Australian and New Zealand dollars strengthening at least 0.4 percent. The rand, which tumbled to a record low at the beginning of the week, rallied 1.1 percent.
Higher crude prices supported the ringgit, which gained 0.6 percent. Malaysia is Asia’s only major net oil exporter.
“We’ve seen some stability in the U.S. and other markets but sentiment will really depend on what’s happening in China with regard to the direction of their currency and economic data,” James Lindsay, an Auckland-based fund manager at Nikko Asset
Management Co., which manages $160 billion globally, said by phone. “If we see
continued weakness in the yuan, that will have a huge flow-on effect for the
rest of the world.”
In Commodities, the Bloomberg Commodity Index rose 0.4 percent, recovering after falling to the lowest since at least 1991 on Tuesday on a glut in raw materials including natural gas and nickel.
Oil bounced back after tumbling below $30 a barrel for the first time in 12 years. West Texas Intermediate was on course to end the longest run of declines since July 2014, climbing 2 percent to $31.06 a barrel. It fell as low as $29.93 a barrel on Tuesday. U.S. inventories probably rose by 2 million barrels through Jan. 8, according to a Bloomberg survey before an Energy Information Administration report.
Copper led industrial metals higher on China’s trade data. The metal, used in power cables, rose 0.8 percent to $4,386 a metric ton on the London Metal Exchange. Gold for immediate delivery dipped 0.4 percent to $1,081.83 an ounce.
“Prices were boosted by Chinese exports that were better than expected,” said Jia Zheng, a senior analyst with East China Futures Co. in Shanghai. The rebound will probably prove short-lived as demand remains weak in China, forcing some fabricators to suspend production before the Lunar New Year holiday in February, she said.
Top Global News
- MetLife Weighs IPO of U.S. Retail as CEO Seeks to Cut Oversight: New company will have $240b in assets
- GE Plans to Cut 6,500 Jobs in Europe After Alstom Purchase: Cuts include 765 positions in France, 1,700 in Germany
- Ford Shares Slump on Profit Forecast Despite Special Dividend: Automaker declares supplemental payout of $1b
- Obama’s State of the Union Optimism at Odds With Voter Anxiety: Draws stark contrast with Republican frontrunners
- CSX Says Profit May Drop in 2016 as Cargo Decline Continues: Railroad says weakness in freight shipping to continue in 2016
- Google Seeks Multiple Auto Partners for Self-Driving Car Unit: Wants to begin announcing some joint efforts this year
- Volkswagen Fix Rejected by California Regulator as Setbacks Grow: Automaker turned down by state before CEO meets with EPA
- Anthem Wants $3 Billion of Drug Savings From Express Scripts: Most pharmaceutical savings will go to clients, CEO says
- Global PC Shipments Fall to Lowest Since 2008, Gartner Says: Researchers forecast smaller decline in 2016 shipments
- KKR Holds Most Cash Since 2011 as Risks in Stocks Increases: Recommends clients hold 7% of their assets in cash
- Buffett’s Clayton Should Be Probed Over Lending, Lawmakers Say: Newspaper article alleged higher loan rates for minorities
- Fed Needs to Tread Carefully to Avoid Rate Reversal, HSBC Says: Says global economy still suffering from “intense” deflationary problems
- Iran Guards Say Will Question U.S. Sailors Before Release: U.S. sailors were detained in the Persian Gulf Tuesday
Bulletin Headline Summary from RanSquawk and Bloomberg
- Commodities are guiding much of the sentiment once again today with equities residing in a sea of green (Euro Stoxx: +1.6%) as energy and material names lead the way higher
- Despite ongoing concerns over China and global growth in general, all markets are enjoying a period of stability at the present time, though we would not quite call it risk on!
- Looking ahead, highlights include US DOE Crude Oil Inventories and US Federal Reserve Releases Beige Book
- Treasuries decline amid rally in global stocks and commodities. Week’s auctions continue with $21b 10Y, WI yield 2.13% vs 2.233% in Dec.; AB InBev jumbo offering could come today, size seen around $25b.
- AB InBev and MillerCoor have watched their popularity slowly erode over the last decade. Their plans to stem the tide include marketing to a generation notoriously resistant to efforts at being won over
- The best-performing U.S. stocks right now are ones that usually do well when the economy isn’t, makers of everything from household cleaning products to food. It’s yet another black cloud for investors fretting over a growth slowdown.
- Obama’s final State of the Union speech, with its echoes of the optimistic tone and unifying vision of his 2004 convention speech, served as a stark reminder of how his promises of unity have fallen short
- Iran’s detention of 10 U.S. sailors hours before the speech -- which Obama didn’t mention -- provided a disquieting note and a reminder of public anxiety over terrorism and threats abroad; the sailors have since been released
- Merkel is being drawn deeper into the Middle East’s turmoil with the suspected suicide bombing that killed at least eight Germans in Istanbul, her country’s biggest death toll in a terror attack in almost 14 years
- China’s trade balance widened to $60b, taking the full-year tally to $594.5b, helping offset capital outflows that have pressured the yuan
- Brazil’s retail sales unexpectedly rose in November by the most in a year, as shoppers shrugged off accelerating inflation and took advantage of holiday discounts
- Sovereign bond yields lower. Asian stocks higher with the exception of China, European stocks gain, equity-index futures higher. Crude oil, copper and gold rise
US Event Calendar
- 7:00am: MBA Mortgage Applications, Jan. 8 (prior -11.6%)
- 2:00pm: Monthly Budget Statement, Dec., est. -$10b (prior $1.9b)
- 2:00pm: Fed Beige Book
DB's Jim Reid completes the overnight wrap
Markets this year are certainly not levitating calmly above the ground in a state of suspended animation. Yesterday saw a momentous fall below $30/bbl for WTI Oil for the first time since December 2003 which makes it -17% YTD.
Prices did recover slightly at the close but WTI still finished the session with a -3.09% decline to settle at $30.44/bbl. Reports of a bombing in Istanbul and comments from Nigeria’s Oil Minister suggesting that a few OPEC member countries wanted to request an emergency meeting actually saw the price go above $32 in the early afternoon before the comments were quickly downplayed by his counterpart in the UAE who said that the cartel will not change its policy despite the latest price collapse. Yesterday saw more evidence of pain at a micro level however after BP announced that it plans to cut 4,000 jobs, while Petrobras announced that it will slash its five-year investment plan by over $30bn. With much of the chatter suggesting that Oil could fall closer to the $20 level, it was noted in the WSJ that some heavier grade Oils from Canada and Iraq are already trading in the teens.
Risk assets trended lower with those moves in Oil, although a strong start for equities in particular helped softened the blow. European equities closed well off their highs but the Stoxx 600 (+0.88%) closed in positive territory for just the second time this year. It was a more roundabout session across the pond where the S&P 500 initially rallied over a percent in early trading, before the leg lower in Oil saw the index fall to -0.5%, only to then once again stage a late rally into the close and finish up +0.78% by the closing bell. US HY Energy spreads leaked +26bps wider by the end of play and at 1,446bps are now at record wides. That’s 67bps wider than where we closed 2015 and 25bps wider than the wides we made last month. Meanwhile the rout in Oil did weigh on metals markets although the moves were less severe. Copper, Zinc and Aluminium closed -0.80%, -0.94% and -0.68% respectively. Treasury yields plunged lower with the 10y yield in particularly finishing -7.2bps lower at 2.103% which is now the lowest since late October.
Oil is now down 50% from its peak in June last year, or over 70% from the highs of June 2014. The other major plunging market is Chinese equities with the Shanghai Comp down 42% since its highs in June last year. Given the recent renewed weakness we thought we’d update the graph we first published back in June comparing the NASDAQ around 2000 with Chinese equities today. The similarities continue. Both saw an initial sharp 2-3 month fall from their peaks followed by a quarter or so of stability . The NASDAQ then started to fall sharply again and Chinese equities seem to have started a similar trend on a similar timeline. While it's hard to read too much into such a chart's predictive power, it's a reminder that when bubbles pop they can pop hard and carry on falling for some time. Both Oil and Chinese equities are currently victims of such a trend.
Speaking of China, this morning has seen the latest trade numbers released with the data making for surprisingly better than expected reading. In Yuan terms, exports were up +2.3% yoy in December (vs. -4.1% expected) from - 3.7% in November. It was the first positive reading since June last year. Imports printed at -4.0% yoy (vs. -7.9% expected) from -5.6% the prior month. It was a similar story in USD terms with exports rising to -1.4% yoy (vs. -8.0% expected) from -6.8%, while imports (-7.6% yoy vs. -11.0% expected) were down less than expected. With the currency front and centre at the moment, that data will likely provide a lift to the PBoC. Speaking of which, the CNY fix was again set unchanged this morning, with moves in the onshore and offshore currencies a lot more subdued relative to recent days (the overnight CNH HIBOR is back down to 8% after two days of massive moves higher).
Chinese bourses are little changed at the break after initially opening firmer with the Shanghai Comp and CSI 300 -0.01% and +0.17% respectively. Elsewhere, that late rebound in Wall Street appears to be setting the tone for a better session this morning. The Nikkei (+2.47%), Hang Seng (+2.38%), Kospi (+1.23%) and ASX (+1.10%) all posting decent gains. A rebound for WTI (+1.45%) is also helping sentiment, while credit indices are 2-3bps tighter.
Aside from the focus on the rout in commodities and events in China, there wasn’t too much else to report yesterday. The largely secondary economic data out of the US did little to move the dial. The December NFIB small business optimism reading rose 0.4pts to 95.2 (vs. 95.0 expected) but still remains well below the post recession peak of 100.4 made back in December 2014. More encouraging perhaps, the details revealed that the net percent of firms planning to raise worker compensation remained elevated at 20% for the second consecutive month which is the highest since November 2006. The January IBD/TIPP economic optimism index edged up 0.1pts to 47.3 (vs. 47.5). Meanwhile the JOLTS job opening report for November revealed an 82k increase in the number of openings from the prior month to 5.43m (vs. 5.45m expected). In the details both the quits and hiring rates held steady at 2% and 3.6% respectively, the latter steady for the fifth consecutive month.
Here in the UK we saw the Pound fall to the lowest level versus the US Dollar since June 2010 yesterday following some soft industrial and manufacturing production numbers. Industrial production fell -0.7% mom in November (vs. 0.0% expected), dragging the YoY reading down eight-tenths to +0.9%. Manufacturing production also missed (-0.4% mom vs. +0.1% expected) during the month with the YoY rate now standing at -1.2%.
In terms of the day ahead, the early data release this morning is out of France where we will get the December inflation numbers. This will be followed by the November industrial production reading for the Euro area where the recent country reports are pointing towards a negative monthly reading. Over in the US this afternoon the only data of note is the December Monthly Budget Statement while in the evening we’ll get the Fed’s Beige Book. Elsewhere we’ll hear from the Fed’s Rosengren (due at 1.20pm GMT) who is due to give his economic outlook, while the Fed’s Evans (due at 5.30pm GMT) will shortly follow this when he is due to provide his own comments around the economic outlook.
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And you should totally accept these numbers at face value...
They're from the government and all.
One, two, three,......many.
Everything from China is 100% reliable data. /sarc
All fixed folks. Nothing to see here. Go back to sleep.
Chinese balance of trade numbers are good, meanwhile the Baltic Dry Index hits a new record low. I know which stat is more credible.
imo this is an insightful piece on the markets that is understandable to the unsophisticated observer (e.g. me).
http://tocqueville.com/insights/paper-gold-utopia-alchemists
And you should totally accept these numbers at face value...
I want to believe....but I don't.
From Marketwatch:
Chinese exports post biggest decline since 2009According to the General Administration of Customs, China's exports fell 1.4% in December in dollar terms from a year earlier, after a drop of 6.8% in November. This was a more modest decline than the 8.0% fall forecast by 15 economists surveyed by The Wall Street Journal. In yuan terms, exports rose last month. Imports last month fell 7.6% from a year earlier, compared with an 8.7% decline in November.
This shit is so sickening its hard to read such bullshit!
gravy for the gravy gobblers.
all fucking good in the neighborhood
bombs away over there
vw ceo to met epa. here is a couple million for your campaign. all good.
all green, cept usual suspects. au and ag
random thoughts.
fucken - eh dude, ha...
My last month paycheck was for 11000 dollars... All i did was simple online work from comfort at home for 3-4 hours/day that I got from this agency I discovered over the internet and they paid me for it 95 bucks every hour... Try it yourself... www.wallstreet34.com
This is all well and good but has Dennis Gartman flipped bullish after the last 3 trading days or do I stay long again today?
the rip your face off rallies are just lame these days. the dax looks like it made it to the other side of the matterhorn which is perilous.
Fucking bullshit.
Obama: "Everything's great!" (The worst presidiot in US history)
China: "Evrything's great!" (Dec. econumbers magically elevated by Jan. manipulation)
Mario: "Everything's great!"
Janet: "Everything's great!"
Nero: "Everything's great!" (While Rome Burned)
Yeah it is great if you are a banker and chicks are free.
As per usual a "better than expected" set of numbers, who could have guessed that would happen.
Gotta get the DOW back to 17,000 by hook or crook. Nothing to see here. Same old shit, different day.
The market always "rallies" during FED/ECB and presidential speeches. Always. You gotta make the plebs feel good, even if it costs a billion or so in script. The half life of such rallies is a few trading days at most.
Seeking Alpha was quoted just yesterday that reported that sea traffic is dead, freighters are anchored in port. So just how are all those goods being transported?
In the cloudTM
STR or STFF sell the rips or sell the fucking fades
either way, great opp to get the fuck outa dodge...
Someone big is propping up the US stock market. It's most likely the Federal Reserve's Plunge Protection Team.
Its time to audit the Fed !!
audit the Fed? not in this lifetime.
http://www.zerohedge.com/news/2016-01-13/banksters-win-again-audit-fed-b...
"Data" sham[e]ta
I think they have misspelled the word "Strong".
You dummies. Don't you understand. It's all the sand they dredged up around the artificial reefs to make those islands. You didn't pay for the sand but suddenly you have a sort of free island that even has a 10,000 fr runway. That is one hell of an asset you can set a high pricetag on with creative accounting. We can call it a resort and then all the sailers, soldiers and airmen wh are sent there can be considered tourists. More GDP from that too. They are guarding the fishing grounds so we can add those profits in (we don't exactly count the fish so who knows what we really is fraudulantly added in ). See. Numbers are all good cause WE TOLD YOU SO.
2000 sheets, not one roll.
Hit it SHANIA - Up Up Up, We Only Go Up From Here!
https://www.youtube.com/watch?v=WX68WjJHhDg
Our company had a very strong December in China. Just as it does not seem logical to talk the economy up based on inflation alone, it does not seem to be logical to talk an economy down based on deflation alone.
People around the world still want to buy things and companies around the world still want to make things. There are really only two variables that screw things up:
1. financial policy (from the banks)
2. central planning (from sociopaths)
The world and its people are constantly whipsawed by those who seemingly believe that it is their right to interfere with people's lives and to parasitically defraud and steal from people. The world would be an easier place to live without the interference and fraud.
... but I am not sure "easy" is what the world is all about. It seems the world is more about enduring the sociopathic nature of the controllers, finding oneself and finding a spiritual path to enlightenment even with all of the obstacles that the sociopaths throw in our way.
If the world did not have challenges, it would be hard to find purpose and to go beyond mere existence.
Every things fine here.
Yah got any used rubbers I could borrow, I need some fixens to make gravy for my rice.
Only in upside-down world do US futures rally on positive Chinese trade data.
When is this farce of a market going to just implode on itself..?
I'm tired of waiting.