Global markets: Weak China trade data hits equities, US dollar

NEW YORK - Global equity markets slumped to a three-month low on Thursday after disappointing Chinese trade data renewed concerns about the world's second-largest economy, but rebounding oil prices and the dollar's market role led US stocks to pare losses.

At their lows, Stocks on Wall Street fell almost 1 percent, and in Europe a bit more, following data that showed Chinese imports in dollar terms had contracted and exports dropped by a sharper-than-expected 10 percent.

The unexpected trade figures pointed to weaker Chinese demand both at home and aboard while deepening concerns over the latest depreciation in China's yuan currency, which hit a fresh six-year low against a firming US dollar.

"If the Chinese economy is struggling, it is a problem for the global economy and you're seeing that reflected in the capital markets, whether it be the strength in the dollar or the volatility in equities," said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.

Oil prices rebounded. After an initial bearish reading of a US Energy Information Administration report, traders soon focused on sharp inventory drawdowns in distillates, including diesel and heating oil, and a decline for gasoline.

The reversal in oil prices helped turn markets that have traded inversely to the dollar. In recent weeks, the dollar has strengthened on growing expectations of a Fed rate hike, which had weakened stocks, said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

"As you've seen the dollar pull back today and oil rally off its lows, the two of those combined have seen some macro money rotate into long equity positions," James said.

"That's why the (stock) market has rallied off its lows."

The Dow Jones industrial average closed down 45.26 points, or 0.25 percent, to 18,098.94. The S&P 500 fell down 6.63 points, or 0.31 percent, to 2,132.55 and the Nasdaq Composite slid 25.69 points, or 0.49 percent, to 5,213.33.

In Europe, the FTSEurofirst 300 index of leading regional shares closed down 0.91 percent to 1,323.95. MSCI's all-country world stock index of equity markets in 46 countries fell to lows last seen on July 12 before paring some losses to trade 0.46 percent lower.

In London, mining stocks BHP Billiton and Rio Tinto fell 4.4 percent and 4.9 percent, respectively, due to the trade data from China, the world's biggest metals consumer.

The dollar tumbled from a seven-month high as risk appetite took a turn for the worse on the soft Chinese data, which rattled markets that expect the Fed to boost rates by year-end.

The US currency also fell from a more than two-month high against the yen and Swiss franc, two safe-haven currencies that benefit in times of political or financial stress.

The dollar was last down 0.54 percent against the yen at 103.62 yen. The euro fell briefly below $1.10 for the first time since July, but quickly recovered to trade 0.40 percent higher on the day at $1.1050.

A hard landing in China, if that were to occur, would pose a bigger problem to the global economy than a "hard exit" by Britain from the European Union because of China's greater economic size and trade profile around the world, Arone said.

China concerns could also deter the Federal Reserve from raising US interest rates in December, as minutes released Wednesday from a September policy meeting suggested, he said.

Oil prices initially fell more than 1 percent after US government data reported the first domestic crude inventory growth in six weeks, a build above market expectations.

Brent crude rose 22 cents to settle higher at $52.03 per barrel, while U.S. West Texas Intermediate crude rose 26 cents to settle at $50.44.

The weak Chinese data pushed investors to buy safe-haven government debt after two straight days of selling.

The 10-year note rose 8/32 in price to yield 1.7481 percent.

Europe's benchmark government bond yield retreated from one-month highs after the latest signals from the world's central banks soothed fears that monetary stimulus could be petering out.

German 10-year yields - the euro zone's benchmark - fell 3.6 basis points to 0.03 percent, pulling back from a one-month high hit on Wednesday, according to Tradeweb.

source: www.abs-cbnnews.com

Asia shares retreat from 2-month high on China concerns

TOKYO - Asian shares stepped back further from two-month highs on Wednesday as a retreat in oil prices and weak Chinese trade data revived concerns about the health of the global economy.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.2 percent in early trade, shedding 1.4 percent from its two-month high hit on Monday. Japan's Nikkei fell 1.0 percent in morning trade.

"Although oil prices have risen sharply from the trough, many investors are not yet convinced if things have improved that much and I suspect they judged now is a good time to sell," said Tatsushi Maeno, managing director of PineBridge Investments.

"But I do believe that this year the global economy will prove better than last year," he added.

U.S. stocks also ended near the day's lows on Tuesday as energy shares tumbled, losing steam after hitting a two-month high on Friday.

S&P 500 Index lost 1.12 percent to 1,979.26 while the tech-heavy Nasdaq dropped 1.26 percent to 4,648.83.

The reversal came as oil prices fell about 3 percent on Tuesday, ending six days of gains for benchmark Brent crude futures, following industry data showing U.S. stockpiles reached record highs again last week.

Brent LCOc1 settled down 2.9 percent at $39.65 a barrel after hitting a 2016 high of $41.48 earlier on Tuesday. Despite the day's decline, it was up 46 percent from a 12-year low of $27.10 struck on Jan. 20.

Also casting a shadow on markets, China's February trade performance was far worse than economists had expected, with exports tumbling the most in over six years.

Exports dived 25.4 percent from a year earlier on depressed demand in all of China's major markets, while imports slumped 13.8 percent, the 16th straight month of decline.

The data did not bode well for many companies that have relied on strong growth in the world's second largest economy, with the energy and material sector at the top of the list.

Against this grim backdrop, assets that are perceived to be safe fared batter.

The 10-year U.S. Treasuries yield fell back to 1.827 percent, erasing its gains made after Friday's payrolls data.

That in turn dented the dollar's attraction against other major currencies.

The dollar's index against a basket of six major currencies stood at 97.245, having slipped to a two-week low of 96.887 on Tuesday.

The yen rose to one-week high of 112.42 to the dollar on Tuesday and last stood at 112.68, a gain of 1 percent so far this week.

The euro rose to $1.1058 on Tuesday, its highest in more than a week. It has since eased to around $1.1001, little changed on the week, ahead of the European central Bank's policy meeting on Thursday.

Financial markets expect the ECB to cut its deposit rate by at least 10 basis points and expand its asset-buying program. However, with so much already priced in, some traders are primed for a repeat of the sharp gains in the euro seen in December when the ECB's measures fell short of market expectations.

Ahead of the ECB, the Bank of Canada will announce its policy decision later in the day.

The Canadian dollar has rallied almost 10 percent from its 12-1/2-year low since the central bank surprised markets by not cutting rates at its last meeting on Jan 20.

The Canadian dollar traded at C$1.3430 per U.S. dollar, off its three-month high of C$1.3263 hit on Monday.

source: www.abs-cbnnews.com

Asia stocks cheered by China trade surprise

SYDNEY - Asian shares made their first real rally of the year on Wednesday after Chinese data trade data beat expectations, offering a rare shaft of light for the global economy.

Japan's Nikkei jumped 2.6 percent from a near-one-year trough, while battered Australian stocks gained 1.3 percent. MSCI's broadest index of Asia-Pacific shares outside Japan sped ahead by 1.6 percent and away from its lowest since late 2011.

Even China's mercurial markets found some relief with the Shanghai Composite Index up 0.8 percent and the CSI300 index 0.9 percent.

The good cheer spread to E-mini futures contracts for the S&P 500 which climbed 0.8 percent.

The gains came after China reported its exports had risen 2.3 percent in yuan-denominated terms in December, from a year earlier while imports dipped 4.0 percent.

In U.S. dollar terms, China's December exports exceeded analyst expectations, falling 1.4 pct from a year earlier, while imports fell by 7.6 percent. Analysts polled by Reuters had expected exports to fall 8.0 percent and imports to fall 11.5 percent.

While investors harbor suspicions about the reliability of the data, on the surface they offered hope that world trade flows were at least stabilizing after a dismal 2015.

It also suggested Beijing might prove successful in its increasingly forceful attempts to stabilize the yuan, so dampening fears of a sustained devaluation.

All of which galvanized currency markets where the Australian dollar, often used as a liquid proxy for the yuan, was up half a U.S. cent at $0.7036.

With safe-haven suddenly out of favor, the Japanese yen and the euro eased broadly. The U.S. dollar moved up to 118.22 yen from an early 117.61, while the euro slipped to $1.0815 from $1.0860.

Against a basket of currencies the dollar gained 0.2 percent.

Likewise, low-risk sovereign debt had to surrender a little of their recent gains and yields on 10-year paper nudged up 3 basis points 2.137 percent.

The hint of firmer demand from China provided a reprieve for commodity prices, which have been under the hammer for months.

U.S. crude edged up 44 cents to $30.88 a barrel a day after diving as deep as $29.93 to break the $20 barrier for the first time in 12 years.

Benchmark Brent was quoted 31 cents higher at $31.17 a barrel. U.S. crude had fallen 17 percent in just seven sessions, a gift to consumers across the globe but also a strong force for disinflation.

source: www.abs-cbnnews.com