Overnight, just as Japan was threatening to roll risk over even more (at the end of the day, or rather night, it did, sliding over 200 point bringing the two day total plunge to nearly 800 points) China reported trade numbers [20]which were "better than expected" even though the net GDP contribution from the overall surplus was actually less than expected at $17.8 vs $27.1, which in turn pushed US futures solidly into the green. Ironically, while the China data was enough to give the US a solid green momentum it was not enough to give the China market a green close. Recall that this is the same data that forced Goldman to admit in January that "China is cooking the books [21]"... the same data that prompted a Bank of America report analyzing the Chinese data to say the following: "One important question in investors' mind is whether we can trust the quality of these trade statistics because they seemed to be significantly distorted between October 2012 and April 2013.... we believe the quality of trade data was improved a lot. Using our adjustment method for fake trade..." Of course BofA "believes it" - this time it will be different. And even if it isn't it is only fitting: fake Chinese trade data to push the fake US stock market higher.
What better way to capture the data discrepancy - as in someone here is lying - than the following chart showing the reported China trade surplus to the US and the reported US trade deficit with China. Just a $10 billion/month recurring "difference"...
[22]
Nuf said.
Aside from China's data fakery, here is a full market recap from RanSquawk:
- Stocks in Europe traded higher this morning, underpinned by the release of encouraging macroeconomic data from China.
- The BoJ kept monetary policy steady by unanimous vote, pledging to increase the monetary base at an annual pace of JPY 60-70trl.
- ECB survey of professional forecasts sees 2013 GDP at -0.6% vs. Prev. -0.4% in May
Market Re-Cap
Stocks in Europe traded higher this morning, underpinned by the release of encouraging macroeconomic data from China, which in turn saw basic materials sector outperform on the sector breakdown. Stocks were also buoyed by the release of better than expected earnings report from Commerzbank, which traded up as much as 11%, in spite of the fact that the bank also noted that the default of Detroit had dented Q2 earnings and resulted in the bank making "adequate" provisions. There was little in terms of fresh macroeconomic news flow and even though Bundsgapped higher at the open, the positive sentiment ensured that prices soon reversed course.
Looking elsewhere, EUR/USD and GBP/USD traded higher, albeit marginally, as the USD index slipped amid the risk on sentiment. Overnight in Asia, the BoJ kept monetary policy steady by unanimous vote, while analysts at Moody’s stated that the tipping point for Japan's credit worthiness would eventually loom if growth remains elusive and if government's debt and refinancing needs remain at very high levels. As a result, the Nikkei 225 index
failed to benefit from Chinese data and thus settled lower by 1.59%. Going forward, market participants will get to digest the release of the latest weekly jobs report from the US and the Treasury will auction off USD 16bln in 30y bonds.
Complete overnight news bulletin from Bloomberg:
- Treasuries gain as Nikkei extends yesterday’s losses and before quarterly refunding concludes with $16b 30Y bonds, which yield 3.65% in WI trading after drawing 3.66% in July.
- Institutional investors’ allocations to USD-denominated bonds have dropped to the lowest level since 2007 as strategists at Morgan Stanley and JPM see a shift away from the debt that may fuel higher borrowing costs
- German exports increased 0.6% in June after falling a revised 2% in May; Chinese exports rose 5.1% in July after dropping 3.1% in June
- Japanese lawmakers are reluctant to reopen legislation on the nation’s sales-tax rise, raising the bar for Abe should he want a shallower path of increases, according to one of his advisers
- BOJ’s Kuroda warned against a delay in the nation’s planned sales-tax increase, while pledging that the central bank will take action should its two-year, 2% inflation target be endangered; the BOJ left policy unchanged at the meeting that ended today, as expected
- Sovereign yields mixed. Nikkei -1.6% as JPY holds near 7-week high vs USD. European stocks, U.S. equity-index futures higher. WTI crude lower, copper, gold gain
Asian Headlines
Chinese Trade Balance (USD)(Jul) M/M 17.82bln vs. Exp. 26.90bln (Prev. 27.12bln)
Exports (Jul) Y/Y 5.1% vs. Exp. 2.0% (Prev. -3.1%)
Imports (Jul) Y/Y 10.9% vs. Exp. 1.0% (Prev.-0.7%)
The BoJ kept monetary policy steady by unanimous vote, pledging to increase the monetary base at an annual pace of JPY 60-70trl. BoJ 2014 Monetary Base Target (JPY) (Aug 8) 270trl vs. Exp. 270trl (Prev. 270trl). The BoJ reiterated CPI is likely to rise gradually and that they are to continue easing until reaching stable 2% price growth.
Moody's said the tipping point for Japan's credit worthiness would eventually loom if growth remains elusive and if government's debt and refinancing needs remain at very high levels.
EU & UK Headlines
ECB survey of professional forecasts sees 2013 GDP at -0.6% vs. Prev. -0.4% in May.
- Sees 2013 inflation at 1.5% vs. Prev. 1.7%
- Sees 2014 GDP at 0.9% vs. Prev. 1.0%
- Sees 2014 inflation at 1.5% vs. Prev. 1.6%
OECD composite leading indicator 100.7 in June vs. 100.6 in May.
UK DMO sells GBP 1.3bln in 0.75% I/L 2034 Gilt, bid/cover 1.85 (Prev. 1.55) and yield 0.080% (Prev. 0.126%)
US Headlines
Fed's Pianalto said Fed is prepared to reduce purchases on more labour improvement. Said highly accommodative monetary policy is appropriate. and employment has been stronger than she expected. She added that the Fed will stick with low rates even after bond-buying program is scaled back.
Stocks in Europe traded higher this morning, underpinned by the release of encouraging macroeconomic data from China, which in turn saw basic materials sector outperform on the sector breakdown. Stocks were also buoyed by the release of better than expected earnings report from Commerzbank, which traded up as much as 11%, in spite of the fact that the bank also noted that the default of Detroit had dented Q2 earnings and resulted in the bank making "adequate" provisions.
FX
EUR/USD and GBP/USD traded higher, albeit marginally, as the USD index slipped amid the risk on sentiment. Overnight in Asia, the BoJ kept monetary policy steady by unanimous vote, while analysts at Moody’s stated that the tipping point for Japan's credit worthiness would eventually loom if growth remains elusive and if government's debt and refinancing needs remain at very high levels.
Commodities
China July Iron ore imports at 73.14mln tons, copper product imports at 410,680 tons and aluminium product imports at 72,368 tons.
Silver Standard Resources said it is on track to achieve FY production guidance of 8.3mln-8.5mln ounces of silver.
Chevron reports unplanned flaring at their 265,500 El Sugundo, California refinery.
Libya oil output continues to fall, with shipments down to about 425,000BPD from over 1MBPD, as worker protests spread.