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China Dec trade balance: Massive -35.8% yoy fall in US imports; exports and imports contracted most since 2016

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    ActionForex.com
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    China posted a set of very disappointing trade data today. Exports and imports posted biggest contraction since 2016. More importantly, imports from the US dropped a massive -35.8% yoy in the month. But for the year, trade surplus with the US hit a record high.

    In USD terms in December,

    • Trade surplus widened to USD 57.1B, above expectation of USD 51.6B.
    • However, exports dropped -4.4% yoy to USD 221.3B.
    • Imports dropped -7.6% yoy to USD 164.2B.
    • Both imports and exports suffered the steepest decline since 2016.

    Staying in December,

    • With the US, export dropped -3.5% yoy to USD 40.3B, imports dropped a massive -35.8% yoy to USD 10.4B.
    • With EU, exports dropped -0.3% yoy to USD 37.6B, imports dropped -2.7% yoy to USD 22.5B.
    • With Australia, exports dropped -5.2% yoy to USD 4.0B, imports dropped -3.4% yoy to USD 7.3B.

    For the year as a whole,

    • With the US, exports rose 11.3% yoy to USD 478.3B, imports rose just 0.7% yoy to USD 155.1B.
    • Trade surplus with the US jumped 17.2% yoy to USD 323.2B, highest on record.
    • With EU, exports 9.8% yoy to USD 408.6B, imports rose 11.7% yoy to USD 273.4B.
    • Trade surplus with EU rose 6.2% yoy to USD 135.1B.
    • With Australia, exports rose 14.2% yoy to USD 47.3B, imports rose 11.2% to 105.45B.
    • Trade deficit with Australia rose 8.9% yoy to USD 58.1B.

    Link to China customs department data, in simplified Chinese.

    ECB Lagarde: We think of financing conditions in a holistic and multifaceted way

      By
      ActionForex.com
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      ECB President Christine Lagarde said in a blog post that policymakers think of financing conditions in a “holistic and multifaceted way”.

      A “holistic” approach means taking a perspective that “covers the entire transmission chain”,. It starts from the “upstream” stage, the risk-free interest rates and sovereign yields. And it ends in the “downstream” stage, the financing conditions for companies and households seeking funding in the capital markets or via bank loans. A “multifaceted” approach allows policymakers to “study each indicator in its own right”, and ensures a sufficiently granular perspective.

      Recent join assessment of the evolution of financing conditions and the inflation outlook concluded that “there was a risk that the repricing in long-term bond yields could be inconsistent with offsetting the negative pandemic shock to the projected inflation path.”

      She warned, “a sizeable and persistent increase in market-based interest rates, if left unchecked, could translate into a premature tightening of financing conditions for all sectors of the economy at a time when preserving favourable financing conditions still remains necessary to underpin economic activity and safeguard medium-term price stability.”

      Full blog post here.

      China import from US dropped massive -31.8% in Q1, healthy trade growth with EU

        By
        ActionForex.com
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        Latest trade data from China showed that total trade between US and China shrank -15.4% in Q1, comparing with last year, as result of trade war. In particular, imports from US dropped a massive -31.8% yoy in the quarter. On the other hand, imports from Canada jumped 25.9% yoy and imports from Brazil surged 23.8% yoy. Overall trade growth with EU remained healthy.

        China trade surplus widened to USD 32.6B in March, well above expectation of USD 8.1B. Exports jumped 14.2% yoy in USD 198.7B, well above expectation of 7.7% yoy. Imports, however, dropped -7.6% yoy to USD 166.0B, much weaker than expectation of -0.1% yoy. Cumulative from January to March, expects rose 1.4% yoy to USD 551.8B. Imports dropped -4.8% yoy USD 475.4B. Trade surplus was at USD 76.3B.

        From January to March cumulative, in USD term, with EU:

        • Total trade rose 5.9% yoy to USD 162.6B
        • Exports to EU rose 8.8% yoy to USD 97.8B.
        • Imports from EU rose 1.8% yoy to USD 64.8B.
        • Trade surplus was at USD 33.0B.

        With US:

        • Total trade dropped -15.4% to USD 119.6B.
        • Exports to US dropped -8.5% to USD 91.1B.
        • Imports from USD dropped -31.8% to USD 28.5B.
        • Trade surplus was at USD 62.6B

        With AU

        • Total trade rose 5.7% to USD 37.9B.
        • Exports to AU rose 9.7% to USD 11.0B.
        • Imports from AU rose 4.1% to USD 26.9B.
        • Trade deficit was at USD 15.9.

        Full set of data by country here.

        Euro and DAX fall on terrible German manufacturing data, bund yield may turn negative

          By
          ActionForex.com
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          Euro dives broadly in Europeans as terrible German manufacturing data points to worsening contraction in the sector. DAX also reversed initial gain and is currently down around -0.7%. Germany 10 year yield dropped to as low as 0.002, down -0.042, on the brink of turning negative.

          With 1.1335 minor support broken, EUR/USD’s rebound form 1.1176 should have completed at 1.1448. Deeper fall would be seen back to 1.1176 low.

          In short, Germany PMI manufacturing dropped sharply to 44.7, down from 47.6 and missed expectation of 48.0. If not for services sector, the German economy should already be in recession. Forward looking indicators are not encouraging with overall job creation at its lowest since 2016. The worst may not be over yet.

          60% trade will come into UK tariff free with new UKGT regime

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            ActionForex.com
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            UK announced a new post-Brexit MFN tariff regime today, called the UK Global Tariff (UKGT). This will replace the EU’s Common External Tariff starting on January 1, 2021, at the end of the Brexit Transition Period.

            Under the new regime, tariffs on a wide range of products will be eliminated. 60% of trade will come into UK tariff free on WTO terms, of through existing preferential access. Successful FTS negotiations will increase the total. Tariffs will be maintained on agricultural products such as lamb, beef and poultry. Car tariffs will be maintained at 10%.

            “Our new Global Tariff will benefit UK consumers and households by cutting red tape and reducing the cost of thousands of everyday products,” International Trade Secretary Liz Truss said.

            Full release here.

            Eurozone PMI manufacturing at 56.6. Broad slowdown across “all nations”

              By
              ActionForex.com
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              Eurozone PMI manufacturing was finalized at 56.6 in March, unrevised, down from February’s final reading of 58.6. It’s also the biggest fall in the series since June 2011. Markit noted broad slowdown across “all nations”. And there is increased signs of “supply chain constraints”. Quote from the release:

              Commenting on the final Manufacturing PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

              • “March saw the biggest fall in the manufacturing PMI since June 2011 and the third successive slowing in the pace of expansion.
              • “We should not be too worried by the fall in the PMI as some moderation in the pace of growth from the surge seen at the turn of the year was inevitable, not least because short-term capacity constraints limit the economy’s ability to grow so quickly for long periods. This has been clearly evident in the recent lengthening of supply delivery times. Some of the slowdown has also been attributable to temporary factors such as bad weather.
              • “However, the fact that business optimism about the coming year has slipped to a 15-month low suggests there are other factors that are now hitting factory order books. Export growth has more than halved since late last year, linked in part to the appreciation of the euro, and in some cases demand is being stymied by higher prices.
              • “The overall pace of growth nevertheless remains robust by historical standards, with decent PMI readings seen in all countries, including Greece, to indicate a steady, broad-based expansion. Manufacturing should therefore make another substantial contribution to GDP growth in the first quarter, and the presence of sustained inflationary pressures will be welcomed by policymakers.”

              Also released, Germany manufacturing PMI was revised down to 58.2, from 58.4. France manufacturing PMI was revised up to 5.37, from 53.6. Italy manufacturing PMI dropped to 55.1 in March, down from 56.8 and missed expectation of 55.5.

              Swiss retail sales dropped -0.2% yoy in February, better than expectation of -0.7% yoy. SVME PMI dropped to 60.3, down from 65.5 and missed expectation of 64.3.

              US GDP grows 3.3% annualized in Q4, core PCE prices unchanged at 2%

                By
                ActionForex.com
                -

                US GDP grew 3.3% annualized in Q4, well above expectation of 2.0%. Looking at some details, consumer spending slowed from 3.1% to 2.8%. Goods spending slowed from 4.9% to 3.8%, but services spending growth rose from 2.2% to 2.4%. Gross private domestic investment growth slowed notably from 10.0% to 2.1%.

                Headline PCE prices slowed notably from 2.6% to 1.7%. Meanwhile, PCE core prices was unchanged at 2.0%.

                Full US GDP release here.

                Also released, initial jobless claims rose from 189k to 214k in the week ending January 19, above expectation of 199k. Goods trade deficit narrowed from USD -90.3B to USD -88.5B, versus expectation of USD -88.7B. Durable goods orders rose 0.0% mom in December, below expectation of 1.0% mom. But ex-transport orders rose 0.6% mom, above expectation of 0.2% mom.

                Copper hits yearly high on global growth optimism

                  By
                  ActionForex.com
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                  Copper soars to the highest levels in over a year this year, driven by renewed optimism regarding global economic growth and expectations of monetary easing from the world’s major central banks. This surge reflects growing confidence among investors that the downturn in manufacturing, including even China, may have past its worst. The prospect of interest rate cuts this year further fuels this positive mood for commodities like copper.

                  Technically, Copper’s rally from 3.5021 resumed this week and it’s now on track to 161.8% projection of 3.5021 to 3.9346 from 3.6324 at 4.3322, which is close to 4.3556 (2023 high). In any case, outlook will stay bullish as long as 3.9380 support holds. The bigger question is whether Copper is indeed resuming the rise from 3.1314 (2022 low) too. Let’s see.

                  US non-farm payrolls grew 379k in Feb, unemployment rate dropped to 6.2%

                    By
                    ActionForex.com
                    -

                    US non-farm payrolls employment grew 379k in February, well above expectation of 148k. Prior month’s figure was also revised sharply up from 49k to 166k. Overall, total non-farm payroll employment was still down by -9.5m or -6.2% from pre pandemic level in February 2020.

                    Unemployment rate dropped to 6.2%, down from 6.3%, better than expectation of 6.4%. average hourly earnings rose 0.2% mom, matched expectations. Labor force participation rate remained at 61.4%.

                    Full release here.

                    10-year yield resume medium term down trend, 2.292 fib level next

                      By
                      ActionForex.com
                      -

                      US 10-year yield opens sharply lower today and hits as low as 2.352 so far. Breach of 2.356 short term bottom suggests that recent down trend from 3.248 is ready to resume.

                      Outlook is rather bearish too as TNX was rejected twice by falling 55 day EMA. Next target is 50% retracement of 1.336 to 3.248 at 2.292.

                      In the bigger picture, current fall is so far, seen as a correction to the up trend from 1.336 (2016 low). Rejection by long term channel support suggests it’s far from over. We’d expect a test on 61.8% retracement at 2.066 before forming a bottom for sustainable rebound.

                      Fed Bullard: Rate cut could be coming as severe trade uncertainties may bring sharper than expected slowdown

                        By
                        ActionForex.com
                        -

                        St. Louis Fed President James Bullard warned the current policy rate setting is “inappropriately high” in the remarks presented to the Union League Club of Chicago on Monday. And, a rate cut could be coming soon to help “re-center inflation and inflation expectations” and provided “insurance” in case of “sharper-than-expected slowdown.”

                        He noted that US GDP growth in 2019 is expected to be a a lot slower than 3.2% over the last year. And more importantly “to the extent global trade uncertainties have become more severe, this slowing may be sharper than previously anticipated”.

                        Additionally, he noted that yield curve inversion has become more pronounced recently, with 10-year yield below federal funds rate. And, “Financial markets appear to expect less growth and less inflation going forward than the FOMC does, a signal that the policy rate setting may be too restrictive for the current environment.”

                        So, “a downward adjustment of the policy rate may help re-center inflation and inflation expectations at the 2% target, and simultaneously provide some insurance in case the slowdown is sharper than expected,” Bullard said, adding, “Even if the sharper-than-expected slowdown does not materialize, a rate cut would only mean that inflation and inflation expectations return to target more rapidly.”

                        Full statement at St. Louis Fed here.

                        Fed: US firms repatriated USD 300B offshore funds after tax cut, but not for investment

                          By
                          ActionForex.com
                          -

                          In a note titled “U.S. Corporations’ Repatriation of Offshore Profits“, Fed studied how companies used the cash holdings outside the US after the Tax Cuts and Jobs Act. Under the new act, tax disincentives on the repatriation of foreign earnings were eliminated. Fed found that US firms repatriated just over USD 300B in Q1 2018, roughly 30% of the estimated stock of offshore cash holdings. However, funds repatriated in Q1 have been associated with a dramatic increase in share buybacks only. And, evidence of an increase in investment is less clear at this stage.

                          After the passage of the TCJA, hare buybacks spiked dramatically for the top 15 cash holders, which accounted for roughly 80% of total offshore cash holdings.

                          However, there is no obvious spike in investment among the top 15 cash holders in Q1 relative to the previous quarter.

                          And,  the top 15 cash holders were net sellers in 2018:Q1, with their total securities holdings, mostly in US fixed-income securities, falling by about 3 percent of their total assets.

                          Full article here.

                          ECB Lane explains three conditions for rate hike

                            By
                            ActionForex.com
                            -

                            ECB Chief Economist Philip Lane explained a a blog post the three key conditions for lifting interest rates, as reflected in the latest forward guidance.

                            The first condition “until we see inflation reaching two per cent well ahead of the end of our projection horizon” provides reassurance that the convergence of inflation towards the new target should be sufficiently advanced and mature at the time of policy rate lift off. It helps to “hedge monetary policy against the risk of reacting to forecast errors”.

                            The second condition expects inflation to stay at 2%  “durably for the rest of the projection horizon”. It “telegraphs that reaching the inflation target should be lasting.”

                            The third condition  “progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at two per cent over the medium term” signals that policy rates should not be lifted unless underlying inflation is also judged to have made satisfactory progress towards the target.

                            Lane further explained that “underlying inflation” is a broad concept and refers to the persistent component of inflation that filters out short-lived, reversible movements in the inflation rate and provides the best guide to the medium-term inflation developments

                            Also, the sentence that the forward guidance “may also imply a transitory period in which inflation is moderately above target” makes explicit that rate forward guidance that is committed to avoiding premature tightening.

                            Full blog post here.

                            Gold hammered by risk on sentiments, deeper correction underway?

                              By
                              ActionForex.com
                              -

                              Dollar and Yen are under much selling pressure today as markets are embracing coronavirus vaccine optimism. Even Gold is hammered down. The breach of 1729.99 minor support suggests temporary topping at 1765.29. More importantly, firstly, bearish divergence condition is seen in 4 hour MACD. Secondly, the thrust out of a triangle consolidation pattern might be terminal. Focus is immediately back on 4 hour 55 EMA (now at 1718.75). Sustained break there would likely bring deeper pull back to 38.2% retracement of 1451.16 to 1765.25 at 1645.26 before bottoming.

                              RBNZ Hawkesby: Balance inevitably becomes a more active tool

                                By
                                ActionForex.com
                                -

                                RBNZ Assistant Governor Christian Hawkesby said in a speech, “in an environment of where the Official Cash Rate (OCR) is near its lower limits, the size and composition of our balance will inevitably become a more active tool for our monetary policy decisions.”

                                He also emphasized the goal of the Large Scale Asset purchase program was “not to maximise our profits or dividend from the activities on our balance sheet”. Instead, “we use our balance sheet to achieve our ultimate policy objectives of monetary and financial stability.”

                                “We recently expanded our LSAP programme up to $100 billion and are preparing the groundwork to use additional tools if needed such as a negative OCR or Funding for Lending Programme (FLP) in order to achieve our remit and ensure the long term prosperity of New Zealanders,” Hawkesby added.

                                Full speech here.

                                Fed’s Logan emphasizes need for tight financial conditions to curb inflation

                                  By
                                  ActionForex.com
                                  -

                                  Dallas Fed President Lorie Logan, in her speech on Saturday, emphasized the importance of maintaining tight financial conditions to prevent resurgence of inflation. She expressed concern that if these conditions are not sustained, progress made in controlling inflation could be reversed.

                                  Logan Logan underscored the significant role that restrictive financial conditions have played in “bringing demand into line with supply and keeping inflation expectations well-anchored”.

                                  However, she noted a recent reversal in this trend, pointing out that long-term yields have relinquished much of the tightening observed over the summer. She warned, “We can’t count on sustaining price stability if we don’t maintain sufficiently restrictive financial conditions.”

                                  Logan also addressed the Federal Reserve’s balance sheet runoff. She indicated that it might be appropriate to consider slowing the pace of this runoff, particularly as overnight reverse repurchase agreement balances approach lower levels.

                                  Eurozone industrial production dropped -0.1% in Feb, EU flat

                                    By
                                    ActionForex.com
                                    -

                                    Eurozone industrial production dropped -0.1% mom in February, the month before coronavirus pandemic measures began. Production of durable consumer goods fell by -2.0% mom and capital goods by -1.5% mom, while production of both intermediate goods and non-durable consumer goods rose by 0.4% mom and energy by 0.7% mom.

                                    EU industrial productions was unchanged over the month. Among Member States for which data are available, the largest decreases in industrial production were registered in Greece (-3.7%), Portugal (-2.8%) and Malta (-2.6%). The highest increases were observed in Estonia (+8.7%), Denmark (+3.7%) and Latvia (+3.1%).

                                    Full release here.

                                    Position trading: CAD/JPY short entered

                                      By
                                      ActionForex.com
                                      -

                                      ** Quick update: The position is stopped out with 66 pips loss within hours after this post. Following up on our position trading strategy mentioned in the weekly report, we’ve entered CAD/JPY short on break of 85.64 support. The development is actually quite disappointing as, despite WTI oil’s free fall to below 55, CAD remains relatively resilient. Though, Yen is starting to pick up some strength for rebound, with USD/JPY in risk of near term reversal.

                                      Near term outlook in CAD/JPY remains unchanged that corrective rise from 84.84 should have completed at 86.98 already. So, we’d hold on to CAD/JPY and lower the stop from 87.00 to 86.30 (slightly above 86.29 minor resistance). A break of 86.29 will suggests that the corrective rise from 84.84 is going to extend with another rise and 86.98 will likely be breached. So, if we’re wrong in our view, there is no point in holding on to the stop at 87.00.

                                      The overall larger outlook is unchanged that rise from 80.52 (March low) is a corrective three wave move that has completed at 89.22. Fall from 89.22 is, in a more bearish case, resuming the down trend from 91.62 (2017 high) through 80.52/55 support. Or in a less bearish case, fall fro 89.22 is a falling leg in the medium term range pattern. In either case, deeper decline is in favor to have a test on 80.52 low.

                                      Eurozone CPI finalized at 7.4% yoy in Apr, core CPI at 3.5% yoy

                                        By
                                        ActionForex.com
                                        -

                                        Eurozone CPI was finalized at 7.4% yoy in April, unchanged from March’s reading. Core CPI was finalized at 3.5% yoy, up from March’s 3.0% yoy. The highest contribution to the annual Eurozone inflation rate came from energy (+3.70%), followed by services (+1.38%), food, alcohol & tobacco (+1.35%) and non-energy industrial goods (+1.02%).

                                        EU CPI was finalized at 8.1% yoy, up from March’s 7.8% yoy. The lowest annual rates were registered in France, Malta (both 5.4%) and Finland (5.8%). The highest annual rates were recorded in Estonia (19.1%), Lithuania (16.6%) and Czechia (13.2%). Compared with March, annual inflation fell in three Member States, remained stable in two and rose in twenty-two.

                                        Full release here.

                                        BoJ raised 2018, 2019 GDP growth forecasts, lowered 2018 inflation forecast

                                          By
                                          ActionForex.com
                                          -

                                          In the outlook for economic activity and prices report, BoJ noted that the economy is “likely to continue growing at a pace above its potential in fiscal 2018.” For 2019 and 2020, “the economy is expected to continue on a expanding trend supported by external demand. Ex-fresh food CPI continued to show “relatively weak developments” when excluding the effects of energy prices.

                                          Below are the updated economic forecasts of BoJ:

                                          • Forecast of fiscal 2018 real GDP was raised to 1.6%, up from January’s estimate of 1.4%.
                                          • Forecast of fiscal 2019 real GDP was raised to 0.8%, up from 0.7%.
                                          • Forecast of fiscal 2020 real GDP was at 0.8%
                                          • Forecast of fiscal 2018 core CPI was lowered to 1.3%, down from 1.4%.
                                          • Forecast of fiscal 2019 core CPI (ex sales tax hike) was unchanged at 1.8%
                                          • Forecast of fiscal 2020 core CPI was at 1.8%.

                                          BoJ also highlighted four major risks to the outlook. First is overseas developments including US economic policies and Brexit. Secondly is the impacts of the planned consumption tax hike in October 2019. Third is change in firms and households medium- to long-term growth expectations. Fourth is fiscal sustainability in the medium term to long term.

                                          There re also three main risks identified to price developments. First is change in firms and households medium- to long-term inflation expectations. Second is items’s prices that are not response to output gap. Third is the developments in exchange rates and commodity prices.

                                          Here is the full report.

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