Scoreboard: Chinese cool

The odd thing about market moves overnight is that investors didn’t seem too fussed about a surge in Chinese trade figures. Odd, because there seems to be a large proportion of the investment community constantly looking for a Chinese downturn or hard landing or some such. That another month passed without this occurring should be have seen things better bid in the European and US session – especially commodities and the Australian dollar. The fact is, Chinese imports of some key commodities like oil and iron ore are at records!

Commodities only saw a modest bid however. Despite the strong export/import numbers from China, this market continues to be unaffected by fundamentals – except copper, that is, which spiked 1.3 per cent. Chinese copper imports were also at a record in January. Elsewhere though moves were more modest. Gold rose about $4 to $1293, WTI crude rose 0.4 per cent ($100.3) and Brent was 0.1 per cent weaker ($108.6).

Global equities didn’t do much either. With about an hour left to trade, Wall Street is mixed, with the S&P500 down 0.1 per cent (1817) and the Dow off 5 points (15,949), although the Nasdaq is 0.2 per cent higher (4199). Gains were broad-based across sectors although energy stocks and basic materials led the charge. European markets had a better session of it, the Dax up 0.7 per cent and the CaC 0.5 per cent higher, while the FTSE100 was flat.

Forex saw the British pound as the key performer, up 130 pips to 1.6587 as the Bank of England upwardly revised its growth outlook. The central bank now expects UK growth at 3.4 per cent in 2014 – a sizeable upgrade from the 2.8 per cent it had previously forecast. The Australian dollar is down nearly 20 pips from 1630 AEDT yesterday, at 0.9030. The euro is then down 40 pips to 1.3590 and the yen is at 102.5.

Rates saw one-way traffic. The yield on the 10-year rose 4 bps to 2.76 per cent, the 5-year is at 1.56 per cent and the 2-year is at 0.34 per cent.

In other news, regular readers will know of my long-held view that none of the major central banks have economic targets anymore – which has significant implications for investors. Well, we got confirmation of that last night when the Bank of England moved its policy goalposts yet again. They formally ditched the unemployment rate target – probably because the target (7 per cent) has largely been met (the current unemployment rate is at 7.1 per cent). Having dumped its inflation target prior to that, the bank now has no target at all, suggesting it will look at no particular indicator. So, despite inflation having breached the bank’s target for many years and despite the unemployment rate target pretty much being met (which is why these were both dropped), the BoE said that there was no need to raise rates for some time.

Interestingly, the St Louis US Federal Reserve president, James Bullard (non-voter), said that the Fed would be forced to take the same steps as the BoE and drop its economic targets given how close they are to being met. Tells you something about the conduct of monetary policy, doesn’t it? Arbitrary – and that’s dangerous for investors and the community at large.

Otherwise, European industrial production fell 0.7 per cent in December after a 1.6 per cent rise the month prior.

In markets today, the key data release will be the employment report which we get at 1130 AEDT. The consensus is that 15,000 jobs were created in January, while the unemployment rate is forecast to rise to 5.9 per cent from 5.8 per cent. There’s not much else in our session so tonight – the key data incudes US retail sales, jobless claims and business inventories. Not much in Europe, the final estimate of German CPI is about it.

Have a great day…

Adam Carr is a leading market economist.

Follow @AdamCarrEcon on Twitter.