LONDON. – Stocks and commodities are faltering after their recent strong rally as poor trade data from China revive global growth fears.
The market’s risk aversion is encouraging demand for traditional “haven” assets such as the Japanese yen and government bonds.
Beijing said exports fell 25,4 percent in February from a year earlier in dollar terms, the worst one-month decline since early 2009, while imports contracted 13,8 percent.
The Shanghai Composite equity index rose just 0,1 percent but Hong Kong’s Hang Seng lost 0,7 percent.
Investors see the data as the latest sign of weakening global trade amid a slowing of the world’s second-biggest economy as it transitions from the developmental phase to more consumer-led demand.
And the news finds a market ripe for a pullback after rallying hard in recent weeks on optimism over the US economy amid hopes for more central bank stimulus.
US index futures suggest the S&P 500, which by Monday’s close had bounced 10,6 percent off the February 11 intraday low, will slide 0,7 percent to 1,988.
The pan-European Stoxx 600, up 12,7 percent over the same period, is slipping 1,1 percent after the FTSE Asia Pacific index shed 0,7 percent.
Leading the declines are those sectors that have enjoyed the biggest gains in recent sessions, notably resources groups which have been revelling in resurgent commodity prices.
The Euro Stoxx 600 Basic Resources index, which includes miners like Rio Tinto and BHP Billiton, is down 3,4 percent after climbing 52 percent off its January 20 trough.
Over the same timescale its stablemate, the Oil & Gas index featuring BP and Royal Dutch Shell, jumped 21,9 percent and is losing 0,7 percent in the current session.
The moves reflect pullbacks in recently rampant base metal and crude prices as traders once again express concern about the prospects for demand from China.
Copper had popped nearly 17 percent since mid January and is down 0,7 percent yesterday.
Brent crude by Monday’s close had rebounded more than 50 per cent from January’s lows on hopes of production cuts to shrink a global glut, and is retreating 0,9 percent to $40,49 a barrel.
So-called commodity currencies like the Australian and Canadian dollars are softer, while emerging market assets are wilting, with the FTSE EM equity index off 0,7 and the oil-sensitive Russian rouble down 0,6 percent.
As supposedly riskier growth-focused assets retreat, so perceived safety plays gain ground.
The yield on 10-year US Treasuries and German Bunds, which move inversely to the bond price, are down 6 basis points to 1,85 percent and off 5bp to 0,17 percent respectively.
The yen, a traditional haven at times of market angst, is 0,5 percent stronger versus the dollar at Y112,90 after revised data trimmed the Japanese economy’s fourth-quarter contraction to an annualised pace of 1,1 percent, from the 1,4 percent originally stated.
The Nikkei 225 equity average, which tends to have a tight correlation to the dollar/yen exchange rate, fell 0,8 percent.
The Japanese GDP revision was better than economists expected — the consensus was for the contraction to deepen to 1,5 percent — but still painted a bleak picture of Asia’s second-largest economy.
“The early indications for the first quarter of the new year do not look promising . . . the upshot is that the Bank of Japan still has more work to do,” said Marcel Thieliant at Capital Economics, who expects the Bank of Japan to deliver further monetary easing at a policy meeting next week.
Yields on longer-dated Japanese government bonds have hit fresh record lows. The 30-year JGB now provides income to redemption of just 0,49 percent after falling 21bp following a strong auction of same duration paper.
The European Central Bank also is expected to loosen policy further, tomorrow, though the euro is having some respite from recent selling, adding 0,1 per cent to $1,1024 after German industrial production in January rose 3,3 percent month-on-month.
That is pushing the dollar index down 0.1 percent to 97,01, which in turn is helping gold add $8 to $1,275 an ounce. – Online.