From Marc to Market:
Recent trends which include firmer equities and oil, weaker euro and
bonds, and stronger dollar-bloc currencies are in reverse today, a turn-around
Tuesday of sorts. MSCI's Emerging Market equity index is snapping a
seven-day advancing streak, giving back yesterday's gains and a little
more. However, Chinese shares managed to post small gains.
China reported a shocking 25.4% decline in February exports
(year-over-year in dollar terms). This
was a much larger drop than anyone expected. In January, exports
fell 11.2%. Imports fared better, falling 13.8% after an 18.8% decline in
January. Still, the drop was more than the 12% economists anticipated.
There are two things going on here. First, there are a few
distortions, including the Lunar New Year and the impact of a drop in
prices. Second, there is an actual slowdown in trade. This is what is happening globally as
well. In value terms, world trade slowed last year. However, in
volume terms, it grew slowly.
The consequence of the dramatic plunge in exports and the fall in imports
is to nearly halve China's January trade
surplus ($63.3 bln) to $32.6 bln. Economists and
policymakers have argued that global imbalances are among the biggest threats
to the world economy. The reduction of current account imbalances in a
world of slow growth seems to necessitate less trade. It seems awkward to
complain about the illness (imbalances) and then worry about the cure (less
trade, more reliant on domestic input and demand).
There were two reports in Japan that caught investors' attention.
First, Q4 15 GDP was revised to -1.1% at an annualized pace from -1.4%.
We had anticipated further deterioration. Private investment and
inventories were tweaked
higher while
consumption and public investment
were adjusted
lower. ...
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