Chinese trade data sparks sell-off in Asian market

Monday, March 10, 2014

Asian equity markets started the week on the back foot as weaker than expected Chinese and Japanese data dampened investor sentiment. Chinese trade data released over the weekend showed a sharp drop in exports in February as the trade balance swung from a surplus of $31.86bn the prior month to a deficit of -$22.99bn as exports fell 18% y/y. The bearish data prompted a 3.25% slide in the CSI 300 while the Shanghai Composite shed 2.86% throughout the session. Producer price data also released over the weekend indicated a 2% y/y deterioration in PPI, a further warning of the slowing outlook. While consumer prices managed to accelerate 2% y/y in February the increase in CPI was below the previous month’s figure of 2.5% y/y. Onshore CNY weakened further after a brief period of consolidation towards the end of last week as the PBOC implemented additional cuts to the reference rate in a bid to shore up the currency. The daily reference rate was lower by 0.18% to 6.1312% sending the yuan back above 6.1400 against the dollar.

Japanese data compounded the bearish undertones in Asian markets as fourth quarter annualised GDP growth trailed its estimate, coming in at 0.7% q/q against the 0.9% q/q expectation. Coupled with a widening trade deficit, which overshot market expectations by increasing to -1,589bn yen in January from -638.6bn yen the previous month, investors were prompted to take profits off the table in a large-scale retreat from equity markets. Both the Nikkei and TOPIX ended the session in negative territory, closing down 1% and 0.76% respectively.

European markets have followed Asian indices lower on the open and as investors grow wary of rapidly rising valuations in recent months we may see a market correction on long term profit taking. London’s blue chip index has opened slightly lower while the DAX index opened sharply lower, underpinned by the 100 day MA after losing 2% on Friday.

Chinese trade balance swings from surplus to surprise deficit

CNFRBAL Index China Imports 2014 03 10 07 56 18

Japanese trade deficit widens

JNBPAB Index Japan Balance Of P 2014 03 10 08 06 14

CNY weakens against the dollar as PBOC cut reference rate

CNY Curncy China Renminbi Spot 2014 03 10 08 10 11

Events for today



Imports, Exports (08/03)



CPI & PPI (09/03)



Bank lending




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