Thu, Dec 01, 2022 @ 13:12 GMT

China trade surplus at USD 28.8B, YTD imports from EU jumped 20.1%

    In USD term, China’s exports rose 12.9% yoy to USD 200.4B in April. Imports rose 21.5% yoy to USD 171.6B. That gave to USD 28.8B in trade surplus. Year-to-date, exports rose 13.7% yoy to USD 745.7B, imports rose 19.6% to USD 668.9B, resulting in USD 76.8B in trade surplus.

    Year-to-date, exports to the US rose 13.9% yoy to USD 135.9B while imports rose 11.6% yoy to USD 55.6B, resulting in USD 80.3B in surplus. That is, comparing with same period in 2017, China’s trade surplus to the US rose 15.6% yoy.

    Year-to-date, exports to the EU rose 12.9% yoy to USD 121.9B while imports rose 20.1% yoy to USD 86.3B, resulting in USD 35.6B in surplus. That is, comparing with same period in 2017, China’s trade surplus to the EU dropped -1.4% yoy.

    Also, year-to-date from January through April, total trade with the US rose 13.2% to USD 191.6B. Total trade with the EU rose 15.8% to USD 208.2B.

    Details in this page. In simplified Chinese, but google translate can do the job on tables pretty well.

    ECB Smets: Economic expansion continuing at a robust pace

      Despite a soft batch of Eurozone data ECB Governing Council member Jan Smets remained optimistic. He said in a WSJ interview that “the latest data remain pretty consistent with the story of the economic expansion continuing at a robust pace.”

      And the central bank would be ready to phase out the EUR 30b per month asset purchase program later this year. Instead, Smets said ECB would turn the policy focus toward communicating on interest rates.

      Reuters reported sources saying the ECB policy would not want to upset market expectations. That is, investors are expecting the asset purchases to end this year and there would be finally a rate hike towards the middle of 2019.

      Richmond Fed Barkin: Economy is remarkably strong

        Thomas Barkin delivered his first speech as Richmond Fed President overnight and expressed his support for more rate hikes ahead. But he declined to comment on how many hikes this year he expects.

        He noted that “monetary policy is still pretty accommodative”. And, “when unemployment is low and inflation is effectively at our target, we probably ought to go to neutral in that environment.” Also, “the economy’s performance as we sit here today is remarkably strong: above trend growth, low unemployment, inflation at target.”

        But Barkin also warned on the risks from the trade tensions between US and other countries. He said it’s “not clear what’s going to be implemented in the end” regarding tariffs. But “there is an issue on business confidence and the business people that I talk to who were almost euphoric in January are now nervous. And they’re nervous about where the macroeconomy is going.”

        ECB Praet blamed easter for negative surprise in Eurozone core inflation

          ECB chief economist Peter Praet said in Geneva today:

          • “This negative surprise in core inflation is mainly attributable to a decrease in services inflation, which is likely to be related to developments in volatile items, also reflecting the timing of Easter this year.”
          • “On the basis of current futures prices for oil, inflation is likely to hover around 1.5 percent in the coming months,”

          Released last week, Eurozone CPI flash slowed to 1.2% yoy in April, down from 1.3%. Core CPI was worse, slowed to 0.7% yoy, down from 1.0% yoy.

          Atlanta Fed Bostic: Some overshoot in inflation is fine

            Altlanta Fed President Raphael Bostic said in an interview:

            • “We have seen some upward pressure” on inflation.
            • “We don’t have the ability to stop trends on a dime. Some overshoot is fine,”
            • If current trends continue, “we are going to see wages start to go up because we will truly have a scarcity of labor,”
            • “I am not sure there is a big signal” in that on inflation.

            BoC Lane: Still a significant degree of uncertainty around the trade situation

              Bank of Canada (BoC) Deputy Governor Timothy Lane said earlier today there are still a significant degree of uncertainty around the trade situation. While news on steel has changed a lot in the last few days, it’s still a fluid situation, not a situation of calling all clear. And even though BoC doesn’t need to stay on hold until there is more clarity, the lack of clarity has dampening effect on outlook.

              Lane also noted that during rate decision discussion, trade uncertainty is definitely a risk to outlook, but that’s just one of a number of factors. And for BoC, one of the reasons to be on hold is that policymakers are very cautious to make sure there is adequate taking stock of what rates are doing to households.

              A look at GBP/CHF long opportunity

                Heading into US session, GBP and USD are trading as the strongest one for today. CHF franc is the weakest, followed by AUD and then EUR. USD’s strength is a bit more convincing as USD/CHF has already took out last week’s high as well as key resistance level at 1.0037. EUR/USD has also just breached last week’s low. GBP/USD is kept below 1.3588 minor resistance, maintaining near term bearishness.

                GBP’s strength today is generally seen as corrective in near nature. Except that, EUR/GBP’s near term outlook is not overwhelmingly bullish. And, indeed, GBP/CHF is an interest cross to look at. The W row of GBP/CHF action bias showed that it was in a brief up trend. Totally neutral D row (latest 9 bars) indicates that it has been in consolidation. Some 6H red bars indicates that consolidation was in form a a pull back whether sideway trading. But as the 6H bars have turned neutral, downside momentum in the pull back has diminished. And, there are indeed a string of blue H bars, arguing that the correction could be finished and GBP/CHF is ready for rise resumption.

                The above could also be seen clearly, in the D, 6H and H Action Bias charts.

                Now back to the regular GBP/CHF bar chart. The break of 1.3600 supported turned resistance is the first sign of completion of pull back from 1.3854 at 1.3507. The structure of the fall supports that it’s a correction. And it’s also held above 38.2% retracement of 1.2861 to 1.3854 at 1.3475, which indicates healthy near term bullishness. Intraday bias is now on the upside for channel resistance (now at 1.3732). Firm break there should confirm this bullish view and send GBP/CHF through 1.3854 high to 61.8% projection from 1.2861 to 1.3854 from 1.3507 at 1.4121 as the first target. Though, break of 1.3507 will invalidate this bullish view and extend the fall from 1.3854 instead.

                This is the kind of setup that one can just buy at the current level at around 1.3600, with a stop at 1.3500 (below 1.3507 support), targeting 1.4121. Risk/reward ratio is good enough for position trading.

                ECB research: Significant increase in protectionism could have material impact on global trade and output

                  In article titled “Implications of rising trade tensions for the global economy“, ECB researcher Lucia Quaglietti warned of the impact of escalation of trade tensions.

                  Based on simulations carried out by ECB staff, in event of a significant increase in protectionism, “the impact on global trade and output could be material.” In particular, if US increases tariffs “markedly” on imported goods from all trading partners that “retaliate symmetrically”, the outcome for the world economy would be “clearly negative. And, “the impact could be particularly severe in the United States”

                  For other countries, those with “closest trade relations” with the US would be most negatively affected. And, “only a few open economies with little exposure to the tariff-imposing country may benefit from trade diversion effects, as they would gain competitiveness in third markets.”

                  In addition, the impact of trade tension escalation could be “felt via a number of channels. Higher import prices would lead to higher production costs and lower household purchasing power. Consumption, investment and employment will also be affected. Moreover, there will be economic uncertainty that leads to delay and consumer spending and business investment. Credit supply could be reduced with requirement for higher compensation. And there could be broad spill over to the global financial markets.

                  China FX reserves dropped to five month low in USD term

                    According to the latest data from People’s Bank of China, the country’s foreign exchange reserves dropped to a five month low in April. Reserves dropped USD 17.97B in April from USD 3.143T to USD 3.125T. In SDR terms, Foreign currency reserves rose 11.3 B from 2.162T to 2.173T.

                    Gold reserves was unchanged at 59.24 Million oz.

                    Total reserves dropped from USD 3.240T to USD 3.221T. In SDR terms, total reserves rose from 2.229T to 2.240T.

                    Full official table here.

                    Eurozone Sentix investor confidence dropped to 19.2, lowest since Feb 2017

                      Eurozone Sentix investor confidence dropped to 19.2 in May, down from 19.6, missed expectation of 21.0. That’s the 4th decline in a row, and hit the lowest level since February 2017. Current situation index dropped 0.2 to 42.8, lowest since October 2017. Expectations dropped to -2, lowest since October 2014.

                      Quotes from the release:

                      “Uncertainties about the introduction of punitive US tariffs and the danger that this could lead to an expansion of protectionist measures are weighing on us.”

                      Overall Germany investor confidence index dropped 0.9 to 24.4, lowest since September 2016. Current situation index dropped 2.2 to 59.8, lowest since April 2017. Expectation index was unchanged at -7.8.

                      Full release here

                      Eurozone retail PMI at 48.6, Italy sales decline accelerated sharply

                        Eurozone retail PMI dropped to 48.6 in April, down from 50.1. Weakness was driven by sharp decline in Italy which hit 21 month-low at 42.7. Germany retail PMI dropped to 9-month low at 51.0. France continued to outperform with retail PMI hit 2 month high at 50.1.

                        Quotes from Alex Gill, economist at IHS Markit:

                        “The latest data highlighted a disappointing month for the eurozone retail sector. Monthly sales were down for the first time for over a year as signs of restricted consumer demand and increased uncertainty begin to show. This was particularly evident in Italy, where the rate of decline in like-for-like sales accelerated sharply and was the most marked for the better part of two years.

                        “Forward-looking indicators add to the dull picture, with falls in purchasing activity and stocks of goods suggesting retailers are taking an increasingly cautious approach to their business operations. The one shining light was a further rise in staffing numbers. That said, without a rebound in customer demand we may see employment slip back into contraction territory in the coming months as well.”

                        Full release here.

                        Swiss CPI rose 0.2% mom, 0.8% yoy. Foreign currency reserves rose to CHF 757B

                          Swiss CPI rose 0.2% mom, 0.8% yoy in April, below expectation of 0.3% mom, 0.9% yoy.

                          Core CPI rose 0.3% mom, 0.5% yoy. Domestic products CPI rose 0.0% mom, 0.4% yoy. Imported products CPI rose 0.9% mom, 2.1% yoy.

                          Also from Swiss, foreign currency reserves rose to CHF 757B in April, up from CHF 738B.

                          BoE to stand pat, eyes on new forecasts and voting

                            BoE is widely expected to keep bank rate unchanged at 0.50%. Asset purchase target will also be maintained at GBP 435B. The expectation of a May hike waned after recent batch of weak data. UK CPI grew merely 0.1% qoq in Q1. April PMIs showed that rebound at the start of Q2 was weak. And, UK CPI also slowed more than expected to 2.5% yoy in March, giving BoE less pressure to hike immediately.

                            It’s now seen that BoE would delay the gradual tightening of of monetary policy. But interest rates are still on the path of going up. Markets are pricing in around 50% chance of hike by August. But we’d argue that November is a better timing until there is a drastic turn in momentum in the latter half of Q2.

                            But such market expectations could shift drastically. Firstly, BoE will release the quarterly Inflation Report and we’ll see how the data released in the past three months affect the growth and inflation projections. Secondly, it would be interesting to see if the two known hawks, Ian McCafferty and Michael Saunders, would change their mind and refrain from voting for rate hike again. And turn in the two could trigger steep selloff in the Pound.

                            RBNZ to stand pat this week, likely throughout 2018 too

                              RBNZ is expected to keep the official cash rate unchanged at 1.75%.

                              According to a Reuters poll, all 16 economists surveyed expected RBNZ to stand pat this week. 14 economists expected RBNZ to hold throughout 2018. 8 forecasts RBNZ to hike by the end of Q3 2019.

                              Sluggish inflation is a key factor giving RBNZ room for not acting. CPI slowed deeply to 1.1% yoy in Q1, sitting near the lower end of the target band.

                              RBNZ Governor Adrian Orr also said after the release that “very benign inflation going forward without doubt, as we’ve forecast.”

                              He added that “what really matters is the confidence and expectation and belief that we are aiming for that midpoint of 2 percent all of the time.” And he pledged that “we are doggedly determined to aim for two percent, but the accuracy around…that is very limited.”


                              BoJ March meeting minutes: Not the time to consider stimulus exit yet

                                In the minutes of March BOJ meeting, some members emphasized the need to have the best communications to the markets.

                                To be more specific:

                                • “It was important for the BOJ to thoroughly explain to the public … that the economy had not yet reached a phase where it should consider the timing and measures of a so-called exit from monetary easing,”
                                • “While normalization, or a gradual reduction in the degree of monetary accommodation, could become a topic for consideration in the future, the BOJ needs to explain to markets that normalization … would be different from monetary tightening,”

                                One member warned of the risk of prolonging ultra loose monetary policy, on financial institutions:

                                • “There was a risk financial intermediation would be pulled back if the low-yield environment was further prolonged,”

                                And, one member expressed the concern of weakness in consumption recovery.

                                Full release here.

                                Australia NAB business condition hit record high, but RBA could delay rate hike to 2019

                                  Australia NAB business condition rebounded notably from 15 to 21 in April. That’s also a rerecord high since the survey started in March 1997. Business confidence also rebounded from 8 to 10.

                                  Quote from the release by Alan Oster, NAB Group Chief Economist:

                                  • “The record high in the business conditions index in the April Survey simply reinforces what has been evident since the middle of last year, that business activity in Australia is robust.”
                                  • “Conditions increased in all industries except for manufacturing and retail and, in trend terms, are strongest in mining.
                                  • “Of some concern is that retail conditions turned negative for the first time this year”
                                  • “On a more positive note, concerns that retail weakness might be spreading to retail & personal services have been alleviated by a significant improvement in conditions in that industry over the last two months, particularly in April.”
                                  • “The improvement in the employment index was particularly welcome in the light of the ABS reporting a slowdown in jobs growth in recent months. Historically, the NAB Survey does a good job at looking through short-term cycles in the ABS data and so we think the labour market continues to improve.”
                                  • “While forward orders fell, on a trend basis they increased and point to a positive outlook for the non-mining economy, including employment and investment growth.”
                                  • “The Survey results for March are consistent with our outlook for the Australian economy. The strength in business conditions and leading indicators suggest economic growth will strengthen and that over-time we should see strong jobs growth and falls in the unemployment rate. Falling unemployment should eventually translate into upwards pressure on private sector wages, at which point the RBA will be in a position to start increasing the current emergency low policy rate. Our current call is for the first move by the RBA to be late this year, but as hard evidence of a firming in wages growth is yet to appear in the data, and unemployment for the moment stuck at around 5.5%, the risk is that any action by the RBA will be delayed into 2019”

                                  Full release here

                                  JPY is strong, but USD is not bad

                                    While JPY is strong after US NFP miss, USD’s performance is not bad. It’s closely following JPY as the second strongest one for the day. And indeed, USD is trading above yesterday’s high against EUR, GBP, CHF.

                                    Looking at USD Action Bias table, D Action Bias show USD is in uptrend against EUR, GBP, CHF, CAD. 6H Action Bias, being neutral, suggest that these pairs were in consolidation. And H Action Bias argues that the trend might be resuming.

                                    Of course, we’ll have to look at the individual pairs too. There isn’t much problem with the bearish view as seen in EURUSD action bias table. Now, we just have to wait for 6H Action Bias to turn red to confirm return of downside momentum.

                                    Non-farm payroll and wage growth missed expectations, unemployment rate dropped to lowest since 2000

                                      US non-farm payrolls rose 164k in April, below expectation of 194k. Prior month’s figure was revised up from 103k to 135k.

                                      Unemployment rate dropped to 3.9% , down from 4.1% and beat expectation of 4.0%. That’s the lowest level since the end of 2000.

                                      Average hourly earnings rose 0.1% mom only, below expectation of 0.2% mom.

                                      Notable buying is seen in the Japan yen after the report, with USD/JPY driving to as low as 108.65 so far. But Dollar is steady against Euro, Swiss, Sterling, Aussie and Canadian, in tight range.

                                      China said agreements reached on some issues with the US, but considerable differences still exit

                                        In an editorial in the official China Xinhua, it’s set that China and the US “reached agreements” on some issues in the trade talks. And both sides agreed to set up a “work mechanism” to keep close communications.

                                        But there are “considerable differences” that still exist on some issues and “continued hard work is required for more progress”.

                                        Eurozone PMI composite at 55.1. Marked, broadbased fading of growth spurt

                                          Eurozone PMI services was finalized at 54.7 in April, revised down from 55.0. Prior month’s reading was 54.9.

                                          Eurozone PMI composite was finalized at 55.1, revised down from 55.2. Prior month’s reading was 55.2.

                                          German PMI composite dropped to 19-month low at 54.6. Italy PMI composite dropped to 15-month low at 52.9.

                                          On the other hand, France PMI composite rose to 2 month high at 56.9. Ireland PMI composite rose to 3 month high at 57.6.

                                          Quote from Chris Williamson, Chief Business Economist at IHS:

                                          “The final PMI numbers confirm the marked, broadbased fading of the eurozone’s growth spurt so far this year. The headline index has fallen from an eleven-and-a-half year peak in January to a 15- month low in April. Despite the drop, the PMI is not yet at a worryingly low level, but the survey details hint at further easing in the coming months.

                                          “While the expansion signalled by April’s PMI is disappointing relative to the elevated levels seen at the start of the year, the survey remains indicative of the eurozone economy growing at a robust quarterly rate of approximately 0.5-0.6%. Employment growth is also still booming, with the rate of job creation in the service sector at its highest for over a decade.

                                          “Employment is a lagging indicator, however, and two reliable leading indicators have turned down, suggesting that both output and hiring trends will weaken further, at least into May. First, backlogs of uncompleted orders grew at the slowest rate for eight months. Second, companies’ expectations about future output hit a five-month low. Any further deterioration could herald new concerns among policymakers regarding the economic outlook.”