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China's exports beat expectations for January - EMEA Brief 14 Feb

DanielaIG

  • Figures released for China's exports in the month of January show a 9.1% growth year on year on its dollar-denominated exports. This has beat expectations of a 3% drop in exports  predicted for the month of January on the back of December's 4.4% drop. This increase brings the total Chinese trade surplus to $39.16 billion for the month of January, notably lower than the $57.06 billion surplus in December. Despite the better than expected figures, some investors are still weary about this signalling real growth in Chinese exports, as they believe this increase can be on the back of companies relocating it products in anticipation of the possible outcomes on the ongoing US-China trade wars.
  • As news came out that US President Donal Trump is considering extending the China tariffs deadline by 60 days, Chinese stocks were slightly higher on Thursday as they pay close attention to the outcome of the US-China talks taking placed in Beijing. Despite the better than expected trade figures mentioned above, the Shanghai composite was down by 0.3% while the Shenzhen composite was slightly higher, up by 0.3%. Hing Kong's Hang Seng index fell by 0.37%.
  • The DJIA closed on the positive on Wednesday, up 117.51 points at 25,543.27, on the back of positive outcomes from trade talks and better than expected stock performances. The S&P 500 closed 0.3% higher at 2,753.03 and the Nasdaq was up by 0.08% closing at 7,420.38.
  • Oil continued its rise on Thursday's Asian session as progress on tariff talks is expected to improve the outlook on global trade and economic growth, and Chinese export figures show that imports of oil remained above the 10 million barrels per day threshold for a third month in a row. The WTI crude futures were up 0.5% at $54.16 and Brent crude oil futures were up 0.6% at $63.98 at midday.
  • Theresa May stood her ground yesterday as she announced that she is willing to go through with a no deal Brexit if MPs do not vote her amended deal, after rumours that she was considering extending article 50 to avoid a hard Brexit on March 29.
  • Credit Suisse has bounced back to profits for the first time since 2014. The swiss bank reported a profit of 2.1 billion swiss francs for the full year of 2018, after posting a loss of 983 million swiss francs in 2017. The bank completed a 3 year restructuring program at the end of last year.

Asian overnight: Asian markets failed to follow up on yesterday’s gains, with indecision rife despite seemingly positive developments in US-China trade talks. The session saw minimal moves, with a 0.3% rise in the Shenzhen composite marking the biggest mover which has seen most early moves eradicated as they move towards the close. This came on a session where data dominated, with a rise in Japanese Q4 GDP (0.3%) being overshadowed by a huge revision to the Q3 figure (-0.6% from -0.3%). That marks the biggest slowdown in Japanese GDP since 2014. Elsewhere, the Chinese trade balance data provided a much more optimistic outlook, with a sharp jump in both imports and exports helping improve sentiment around the Asian powerhouse.

UK, US and Europe: Germany has just narrowly missed a technical recession as Q4 GDP came in flat at a 0% growth, below the 0.1% growth forecasts. This poses big concerns for the future growth of the European Union as Germany is usually seen as the big growth driver. The troubling data comes after Italy announced it had entered a technical recession at the end of January as it had two consecutive quarters with GDP contraction. Looking ahead, growth concerns remain the key focus for the European session, with eurozone GDP figures for Q4 expected to bring continued volatility for the euro and eurozone stock markets. In the US, retail sales, PPI, and business inventories are worth keeping an eye out for, while Coca-Cola provides the main US company to report.

Economic calendar - key events and forecast (times in GMT)

14feb.PNG

Source: Daily FX Economic Calendar

10am – eurozone GDP (Q4, preliminary): QoQ rate expected to be 0.2% and YoY 1.2%, from 0.2% and 1.6% respectively. Market to watch: EUR crosses
1.30pm – US retail sales (December): expected to rise 0.2% MoM. Markets to watch: US indices, USD crosses
Evening – UK Parliament to vote on Brexit deal

Corporate News, Upgrades and Downgrades

  • EasyJet said that it was in discussions with Ferrovie and Delta about forming a consortium to look at Alitalia, but that there was no certainty any transaction would proceed.
  • AstraZeneca reported a 2 fall in overall revenue for 2018, to $22.09 billion, while reported operating profit fell 7% to $3.38 billion. The firm said that the final quarter was strong, with a good performance in its emerging markets business.
  • Micro Focus suffered a 5.3% drop in revenue for the year to the end of October, but adjusted earnings rose 9.2% to $1.53 billion.

Chemring Group raised to overweight at Barclays
Grieg Seafood upgraded to buy at Fearnley
Royal Mail raised to equal-weight at Morgan Stanley

Air France-KLM cut to sector perform at RBC
Dunelm downgraded to reduce at HSBC
RSA downgraded to neutral at JPMorgan

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