Skip to content

XTB TRADEBEAT

Hopes for trade talks boost stocks, Chinese trade shows deficit

Summary:

  • Donald Trump took more conciliatory tone on trade

  • Chinese trade balance data disappointed showing first monthly deficit in over a year

  • Australian dollar got boosted by rising Chinese imports

Equities in the US rose after President Donald Trump delivered some remarks suggesting easing tensions between US and China as negotiations between two world’s biggest economies have begun. Apart from that we will mention Chinese trade data as it showed deficit in balance for the first time sime February 2017. On top of that we will say a word about Australian dollar as it is the top gainer in the G10 basket.

The US President directed officials to weigh possibilities concerning rejoining Asia-Pacific trade pact. Let us recall the Trump withdrew from the agreement shortly after taking office. Moreover, he also said that it is unlikely that we will see US and China impose more tariffs on each other adding “Now we’re really negotiating and I think they’re going to treat us really fairly”. The remarks boosted sentiment as it seems like now both parties are interested in reaching agreement, especially as they come just a few days after Chinese President Xi took conciliatory tone on trade during his speech in Boao. In the aftermath equities in the US rose with Dow Jones (US30) adding 1.21%, S&P 500 (US500) gaining 1.01% and Nasdaq (US100) advancing 0.83%.

link do file download link

Chinese trade balance data has shown monthly deficit for the first time since February 2017. Source: Bloomberg

Let us stay in the trade theme as trade balance data from China was published overnight. The reading turned out to be a huge surprise for the investors as it signalled first monthly deficit in Chinese trade balance since February 2017. Taking a look deeper we can see that imports rose in March by 14.4% YoY while the market consensus expected an increase of 12% YoY. When it comes to exports economists surveyed by Bloomberg pointed for a 11.8% YoY increase while the actual data saw a decrease of 2.7% YoY.  However, one should keep in mind that exports rose by 16.4% YoY in March 2017 thus the base effect was clearly negative. In turn Chinese trade balance missed the estimate of $27.5 bln surplus to show the deficit of $4.98 bln.

link do file download link

AUD got boosted by easing trade tensions and rapid growth of Chinese imports. Source: xStation5

Moving onto the FX market the Australian Dollar is outperforming its other G10 peers. This is not surprising given the above mentioned trade data from China. Keep in mind that Australia is one of the main exporters thus a rapid pace of growth of Chinese imports supports Aussie. AUDUSD has rebound off the 78.6% retracement level of the last major upward impulse. The pair is slowly approaching the 200-day moving average after surpassing both “quicker” averages (8-EMA and 33-EMA). In case the trade tensions keep on easing we may see Aussie advance towards the last local high around 0.79 handle.

 

Disclaimer

This article is provided for general information purposes only. Any opinions, analyses, prices or other content is provided for educational purposes and does not constitute investment advice or a recommendation. Any research has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Any information provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it.

Past performance is not necessarily indicative of future results, and any person acting on this information does so entirely at their own risk, we do not accept liability for any loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information.