A pick-up in Chinese trade data and maybe ongoing taper delay talk seem to have given markets a boost last night. Well, US markets, with the S&P500 up 1 per cent to 1671, the Dow 140 points to 15,063 and the Nasdaq 1.3 per cent to 3706. Stocks in Europe were flat to negative, although the divergence between US and European markets doesn’t seem to be anything other than a reversal from Friday’s session.
But back to that Chinese data. It’s not so much that the trade figures were strong – if they were no one would believe them. It’s more that, one, they picked up (exports and imports were up 7 per cent annually) and two, it compliments other global data-flow that’s showing an acceleration in growth.
Moreover, Chinese inflation data out yesterday showed no pick-up – broadly steady at 2.6 per cent – and this has got the stimulus call out again. Either way, this is good news on China and one more reason to be optimistic on global, and thus domestic, growth prospects.
Sure enough, the data also helped see the Australian dollar higher, which rose 40 pips from yesterday afternoon to 0.9232. But the dollar’s move wasn’t just China-related. It’s a US dollar story as well, and here it seems that taper delay talk is driving the US dollar down. The euro was 80 pips higher to 1.3252 and the British pound was 50 pips higher at 1.5696, although the yen did nought and remains close to target at 99.6.
Now, the interesting thing to note about the price action is that commodities didn’t share in this Chinese sentiment boost and nor are they really reacting to the possible taper delay. Indeed crude was down 1.4 per cent ($109), gold was flat and silver was weaker (0.7 per cent). Only copper rose – by 0.6 per cent – and that’s about the limit of the China effect. China is a big consumer.
Elsewhere though, markets were watching events in Syria more closely. The latest news on this front concerns a Russian proposal that would see Syria’s chemical weapons stockpile placed under international control. The end game would be to destroy this stockpile. Now the Russians are hoping that this would avoid any escalation of hostilities and certainly it is a face-saving way for the US to back down.
It’s not looking good though. The Russian proposal was made in response to a question posed to US Secretary of State John Kerry. He was asked what Syria could do to avoid a US attack, and replied that Syria could hand over its chemical weapons to the international community “without delay”. Cue the Russians.
The US State Department has so far only said that Kerry’s statement was not a formal proposal – it was only “rhetorical and hypothetical”. At the moment, President Barack Obama is set to deliver a national address tonight, with Congress to vote on proposals from late this week and into next.
There wasn’t really much else of interest. The US 10-year bond yield was little changed at 2.91 per cent, which covers the price action, and news flow otherwise wasn’t that exciting.
So looking to the day ahead, the key data release for Australia is NAB’s business survey at 1130 AEST – confidence is shot, obviously, and has diverged sharply from global trends. Later in the day, at 1530 AEST by the looks, we see a run of Chinese data including retail sales, industrial production and investment – all expected to be strong. Tonight is comparatively quiet, with small business optimism and job openings for the US.
Have a great day…
Adam Carr is a leading market economist.
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