From Across the Curve:
FX
Via Marc Chandler at Brown Brothers Harriman:
Hump Day Bump
– Many of the capital markets are enjoying reversals today
– The most important economic news that appears to have helped foster the “risk-on” activity was China’s trade figures
– The North American calendar is light
–
Brazil reported November retail sales at -7.8% y/y; iron ore company
Vale reportedly drew down $3 bln from a revolving credit line to boost
liquidity
Price
action: The dollar is mixed against the majors. The dollar bloc is
outperforming, while the yen and the Swiss franc are underperforming.
The euro is trading lower near $1.08, while sterling is trading near
$1.4430, unable to break below yesterday’s cycle low around $1.4350.
Dollar/yen trading back above 118. EM currencies are mostly firmer.
ZAR, RUB, and MYR are outperforming while PHP and TWD are
underperforming. MSCI Asia Pacific was up 1.9%, with the Nikkei rising
2.9%. MSCI EM is up 1.1%, though the Shanghai Composite was down 2.4%
and the Shenzen Composite down 3.5%. Euro Stoxx 600 is up 1.25% near
midday, while US futures are pointing to a lower open. The 10-year UST
yield is up 3 bp at 2.13%, while European bond markets are mostly
firmer. Commodity prices are mostly higher, with oil up around 2.5%.
- Many of the capital markets are enjoying reversals today.
Equity markets are mostly higher. The MSCI Emerging Market equity
index is up more than 1%. Several key commodities, like oil and copper,
are firmer. Bond markets outside the US are firmer, with Japan’s
10-year yield slipping to new record lows slightly below 20 bp. The
dollar is mixed, as the dollar-bloc currencies firm, as are most of the
freely traded emerging market currencies, with the beleaguered South
African rand leading the pack (~1.1%) and the Russian ruble a close
second (~0.9%). The European complex, including sterling, and the yen
are heavier.
- The most important economic news that appears to have helped foster the “risk-on” activity was China’s trade figures.
We suspect that after the sharp and persistent moves to start the
year, the market was vulnerable to a counter-trend move, and almost any
spark may have been sufficient.
- China reported a considerably larger than expected trade surplus.
How this was achieved depends on how the data is denominated.
Specifically, China reports its trade figures in both yuan and dollars.
In yuan terms, the surplus jumped to CNY382.05 from CNY343.10. The
consensus had expected a small decline. The record large trade surplus
was recorded in October at CNY393.20 bln.
- The larger trade surplus in December was driven by stronger than expected exports.
Exports, in yuan terms, rose 2.3%. The consensus was for a 4.1%
decline after a 3.7% fall in November. It is the first year-over-year
increase since June and only the second positive reading for all of last
year. Imports fell 4.0% year-over-year, which is about half of the
pace the market expected.
- A somewhat different picture emerges if the figures are in US dollars.
The trade surplus widened to $60.09 bln from $54.1 bln. It was the
fifth largest for 2015. In dollar terms, exports did not rise but fell
1.4%, which was still considerably better than the Bloomberg consensus
(-8%). Imports fell 7.6% in dollar terms. This compares with an 8.7%
fall in November and expectations for an 11% decline in December....
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