Chinese Trade Data Casts Doubt on Risk FX

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Chinese trade data missed its mark badly printing at $19.63B surplus versus $26.85 expected as both imports and exports collapsed relative to expectations leading some investors to question the relatively robust Industrial Production and Retail Sales data issued on Saturday.
Chinese exports rose only 2.9% versus 9.0% expected while imports were flat on the month versus forecasts of 2.0% gain.

Some analysts have suggested that the sharp falloff in exports may have been due to the strike at Los Angeles Long Beach port which handles much of the Asian trade into North America, as US importers front loaded demand into October in anticipation of the interruptions caused by labor unrest. However, Chinese exports were also sharply lower to Europe contracting -18.0% in November after falling -8.1% in October . That data suggests that global demand for Chinese goods may be slowing far more than the market expects putting in question the relatively strong Chinese Industrial Production results which showed a gain of 10.1% versus 9.8% anticipated.

If Chinese trade data does indeed reflect a much steeper decline in aggregate global demand, rather than just one off factors, then risk assets could see a sharper correction into the year end as investors make proper adjustments. So far the reaction in the currency market has been muted with AUDUSD losing only 20 points to remain well within striking distance of the 1.0500 barrier as it trades at 1.0475. However, as uncertainty grows both in Europe and North America, the anticipated growth scenarios for the world’s two biggest markets could quickly change and the pressure on risk assets is likely to resume if further evidence of slowing demand appears on the horizon.

Boris Schlossberg
Managing Director

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