Rally, rally, rally

Overnight action confirms that China trade data released yesterday is a game changer. Strong continuations of commodity and US share rallies, and a melt-up on continental bourses, have futures traders expecting further strength in Asia Pacific shares in trading today. Adding to the good news for Australian investors, US banks shares rallied hard after JP Morgan reported a better than expected quarter.

A key Q1 market narrative revolved around China. It was two pronged. The Chinese economy was slowing, and slowing much faster than official data showed. The 11.5% surge in exports in March directly contradicts both points, showing strong growth in data that is verifiable by trading partners. This shoots the China bears in the heart, and is likely to echo through global and Australian share trading for days and weeks to come.

Stronger China data has a direct impact on commodity prices via its influence on perceptions of global demand. The 6% lift in BHP’s share prices yesterday was outstripped in both London and New York trading, pointing to potential market leadership again today. However, energy stocks could lag. Oil prices softened after US inventory data showed a resumption of the stockpile build, and traders are now expressing doubts about this weekend’s OPEC meeting.

The financial sector led US shares higher, with a gain of 2.25%. Within the sector banks performed best, gaining 3.75% as a group. The rally followed JP Morgan’s results, where many analysts focused on the provisioning for energy exposures – another Q1 bear trope. The increase in provisioning to $1.3 billion against their $44 billion exposure appeared to bring a numerically rational facet to an area of previous hysterical extrapolation.

The release of Australian jobs data during the session could impact momentum. Expectations are frothy in light of the volatility in the data, based on a potential bounce back from the recent weak reads. This may mean even a reasonable read of up 15,000 jobs could spark selling.