Chinese exports rise, supported by weaker yuan

Wednesday, January 13, 2016

Another mixed session for Asian equity markets as Chinese trade data released overnight saw a bigger than expected surplus in December and PBOC intervention saw the onshore and offshore Chinese yuan exchange rates converge. Japanese benchmark stocks led the charge higher after a jittery session yesterday while Chinese stocks pared recent gains, broadly dragged lower by a combination of lower crude prices and stronger currency. Offshore yuan gained against the dollar for the third straight session, trading around 6.5750 at the time of writing. While the PBOC have stepped up efforts to shore up the Chinese yuan but the softer currency has at least benefitted exports which saw a surprise 2.3% increase y/y in December, against an expectation of a -4.1% y/y decline. However, these positive currency effects on exports may be transitory as a stronger yuan is tabled for 2016.

Front month WTI prices dipped below $30/bbl yesterday, and the world went crazy. It spent all of two minutes trading just below this ominous level before recovering towards $30.44/bbl at the close. With the US benchmark hitting its lowest point in over twelve years analysts are throwing around previously derided $20/bbl price target. Fundamentally, we’re not in the best position as output remains robust and demand struggles to improve materially and with the recent volatility in capital markets we could see further spikes on the downside.

Today’s data will be of particular interest, with the EIA set to release their weekly crude oil inventory statistics this afternoon. Market participants expect a 1.8m barrel w/w build to stockpiles with a 600K increase in stockpiles at Cushing, OK, which if correct would see stockpiles at the key oil hub rise for the tenth consecutive week. After the close of the European session investors in the US will have the US Fed Beige Book as well as the monthly budget statement for December.   

Chinese trade data surprises, buoyed by exports

CNTSTCN Index China Trade Balan 2016 01 13 08 08 09

WTI slips below $30/bbl for the first time since 2003

CL1 Comdty Generic 1St CL Fut 2016 01 13 08 51 31

Events for today

0200

CN

Dec

Trade Balance

1200

US

Jan

MBA Mortgage Applications

1530

US

w/e

EIA Crude Oil Stocks

1900

US

Jan

US Fed Beige Book

2350

JP

Dec

PPI

Topics: Crude oil, WTI, PBOC, CNH
More from: Kash Kamal