China’s trade data trends weaker

No front-loading effect in August for China

A series of releases had been seen over the weekend providing a mixed picture for the global economy. While the US labour market data resilience was noted on Friday, China’s latest August trade data which arrived below consensus for exports had dampened the mood for Asia markets going into the fresh week. At -1.0% year-on-year (YoY), this had been below the market consensus of 2.0% growth, which had likely been underpinned by front-loading expectations ahead of the September 1 additional tariffs imposition date. Even though imports came in slightly better than expected at -5.6% YoY, this nevertheless placed the overall trade balance at a decline of more than what had been pencilled in. Coming on the tails of Friday’s easing announcement by the People’s Bank of China (PBoC), this throws a spanner in the works for the good works of monetary policy optimism.

Against the abovementioned leads for Asia markets, the risk-on mood carrying on from last week appears muted. Early movers in the region across the Australian ASX 200 and the Japan Nikkei 225 had both been seen in moderate gains, waiting on further monetary policy updates this week to stimulate the rally. All said, however, one would note that the FX market had reacted in the favour of the Chinese currency following the PBoC update. Although it had largely been within expectations post the State Council meeting to see the 50 basis point Reserve Requirement Ratio (RRR) cut and further easing expectations, this sustains the positive sentiment within the Chinese market following last week’s trade talk announcement. USD/CNH trekked down to the 7.102 support when last checked. Watch a break here for prices back into the earlier consolidation zone.

Source: IG Charts

September Fed cut expected despite favourable outlook

Tuning back to the updates from the US on Friday, despite wage inflation coming in ahead of consensus, the noticeably softening trend for payroll additions continued to lift rate cut expectations. Fed chair Jerome Powell’s latest balanced rhetoric on Friday reflected the Fed’s view on resilient economic conditions and reassured the market from recession concerns, though at the same time once again reinforced the odds of a September cut. Consequently for the greenback, this had seen to a slight dip in strength from last week for the US dollar index, but nevertheless keeping to its uptrend. Ahead of the September 17-18 meeting, it remains with data this week to guide the balance for the forward guidance that will be key. US CPI and retail sales amongst the key data to watch on Thursday and Friday respectively.

Source: IG Charts

Friday: S&P 500 +0.09%; DJIA +0.26%; DAX +0.54%; FTSE +0.15%