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Markets were quiet on Tuesday with the Dow and S&P500 closing down with mild losses as the market digests the reporting season. In Asia, the Shanghai Composite didn’t see much of a reaction to the latest export data, where opinion was polarised and divided. The index still managed to close up 0.17% to 3,293. Commodity prices consolidated with gold closing near intra month highs after a brief sell off and copper finishing slightly lower at US$2.39 per pound.
The Nikkei was down 1.11% to 18,234 and the ASX 200 closed off 0.57% at 5,202 with profit taking continuing in the resources sector, after last week’s strong gains.
In Europe the STOXX50 saw a 0.89% fall to 3,218, while in the UK, the FTSE was lower by 1%. M&A activity was in focus with SAB Miller accepting a £44 per share offer from AB InBev.
China’s record trade surplus dominated the economic data on Tuesday, with imports falling in September for the 11th month in a row. The 17.7% decline on a year ago, in Renminbi terms, compares to a 14.3% fall in August and expectations for a 16.5% fall. The figures have been driven primarily by weaker commodity import prices.
The positive news was that exports outperformed forecasts with September seeing only a 1.1% fall on a year ago. Market expectations for a 7.4% decline in exports proved to be too pessimistic. The actual data print was a notable improvement on the 6.1% drop in exports for August.
The net result was that the Chinese trade surplus hit a record high at RMB376bn or US$59.4bn. The figure was nearly double that of a year ago and around 30% higher than forecasts. This will alleviate primal market fears from just a few weeks ago that China was facing a capital outflow crisis, and foreign exchange reserves were plummeting.
China’s foreign exchange reserves are now stabilizing with capital outflows steadying and the rise in the trade surplus will see September’s outflow effectively replaced. What this all tells me, is the economic situation in China is less pessimistic than what the markets have been pricing in for much of the past quarter.
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