Chinese Trade Balance data consistent with an economic upswi

15.19 AEDT, Friday 8 February 2013

Chinese Trade Balance data consistent with an economic upswing

By Tim Waterer (Senior Trader, CMC Markets)

It appears the market was looking for a reason to sell heading into the ECB press conference today. While Draghi’s comments provided a lot of positivity, it was the inflationary concerns that undid the Euro.

A strong Euro and resulting inflationary pressures obviously warrant close attention, however if the Euro is stronger due to growing stability and confidence in the region then this is not the worst dilemma the ECB could be facing. Draghi and co would much rather be in this spot than where they were for much of 2012, where a declining Euro was evidence that traders were fearing the worst for the Eurozone. I suspect that these Euro inflationary issues will not linger as a massive obstacle for the progress of risk assets. Based on what we were facing last year this recent EU drama pales by comparison.

Declines in the Euro and soft US equities added to the Aussie Dollar’s woes on the back of a less than resounding week of domestic Australian macro data. The release today of the RBA minutes echoed the RBA’s ‘ready to cut rates as needed’ stance, while the central bank also pointed to an extended period of below trend growth. From an AUD standpoint there was nothing remotely bullish in the minutes, which is why the AUD slipped to its session low (1.0256) upon the release. Better than expected Chinese Trade Balance data provided some relief for the recently-beleaguered AUD. I expect the AUD will remain under short term pressure however with the macro indicators remaining patchy at best.

Rising Chinese import and export numbers brightened the mood across Asian markets. An increase in the Trade Balance was consistent with recent Chinese data suggesting that the world’s second largest economy is on an upswing. Mining stocks on the Australian sharemarket enjoyed a productive trading session in light of the numbers from China, with RIO and BHP both able to build upon recent gains with growing Chinese imports boding well for our Materials stocks. The Energy and Consumer Discretionary sectors also pushed higher in a well-rounded performance from the local bourse. The ASX200 remains en-route to crack the 5000 level sooner rather than later, with stocks enjoying an extended ‘purple patch’ so far in 2013.
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