China? China! Kuroda Contemplates His Exit, And Other Overnight Shenanigans

It’s “Super Thursday” and although the real fireworks (if there are any) aren’t set to begin until later, it was indeed an interesting overnight session.

We’ll start in Japan where GDP data missed badly. Here’s the quick breakdown:

  • Japan Revised 1Q GDP Rises Annualized 1%; Est. +2.4%
  • GDP rises 0.3% q/q; est. +0.6%
  • Nominal GDP falls 0.3% q/q; est. 0%
  • Private consumption rises 0.3% q/q; est. +0.4%
  • Business spending rises 0.6% q/q; est. +0.5%

“The Japanese government’s second estimate for Jan-Mar (1Q) 2017 real GDP came in at +1.0% qoq annualized, a sharp downward revision from +2.2% in the preliminary reading, and in stark contrast to the market and our forecast for a slight upward revision (+2.4%),” Goldman wrote, before noting that “this was mainly attributable to inventory, and the Japanese economy still looks to be trending firmly once this volatile factor is stripped out.”

Ultimately, this was overshadowed by reports that the BoJ is starting to think about changing its forward guidance to communicate an intention to normalize policy. Here’s Bloomberg:

The Bank of Japan is re-calibrating its communications to acknowledge that it is thinking about how to handle a future exit from monetary stimulus, without giving the impression that this is on the agenda anytime soon, people with knowledge of discussions at the central bank told Bloomberg’s Toru Fujioka and Masahiro Hidaka.

With inflation still far below target, the BOJ is contending with increasing debate of exit in markets, the media and among some lawmakers.

Note that’s entirely consistent with what we discussed on Wednesday in “Josephine Witt’s Reign Is Over Or, Central Banks May Actually Mean It This Time,” and of course coincides with what’s expected to be a change in the ECB’s tone today.

The reaction in USDJPY was swift:


“Leveraged accounts shorted USD/JPY on reaction to a Bloomberg News report that the Bank of Japan said to be conducting simulations internally on how an exit from monetary stimulus could play out,” an Asia-based FX trader said, adding that “the fact that BOJ is giving insight to their internal debate at all is seen as bearish by clients.”

As you can see in the chart, that move was reversed and then some, but this is very, very notable.

We also got trade data out of China.



Yes, China.

Here’s it is:

  • China’s May Exports Rise 8.7% Y/y in Dollar; Est. +7.2% (range +5.0% to +11.7%, 33 economists).
  • May imports climbed 14.8% y/y; median est. 8.3% rise (range +5.0% to +14.4%, 33 economists)
  • May trade surplus $40.8b; median est. $47.8b surplus (range $30b-$55b surplus, 31 economists)


Some folks were pretty pleased with those numbers although most of the laudatory remarks came with caveats.

“The trade surplus figures are quite good and even more so if you look at import and export figures in volume. Exports are ballooning,” Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis in Hong Kong said.

“Imports, in particular, held up surprisingly well,” Julian Evans-Pritchard at Capital Economics in Singapore added, before cautioning that “given the approaching headwinds to the economy from policy tightening, we doubt this strength will last.”

“The further pick-up in growth of exports to the US and EU increases the likelihood that the current global trade improvement is sustainable,” said Louis Kuijs, head of Asia economics at Oxford Economics in Hong Kong. “Nonetheless, even though the headline year-on-year data should continue to look decent in the coming months, the cooling of China’s domestic demand that we expect should weigh on imports in the rest of 2017,” he went on to warn.

The aussie dipped after Australia’s April trade balance shrunk to a surplus of A$555 million. That missed the median estimate of A$2b “bigly” and was down from A$3.2b in March.


That would have gotten worse, but the China trade data saved the day.

It’s also worth noting that as Britain votes, the pound is sitting at a two-week high:


So that was the overnight session. Now strap the fuck in as we wait on Draghi, Comey, and the UK vote.

Snapshot of global equities:

  • Nikkei down 0.4% to 19,909.26
  • Topix down 0.4% to 1,590.41
  • Hang Seng Index up 0.3% to 26,063.06
  • Shanghai Composite up 0.3% to 3,150.33
  • Sensex down 0.08% to 31,247.58
  • Australia S&P/ASX 200 up 0.2% to 5,676.60
  • Kospi up 0.2% to 2,363.57
  • FTSE 7474.18 -4.44 -0.06%
  • DAX 12732.25 59.76 0.47%
  • CAC 5286.34 20.81 0.40%
  • IBEX 35 10965.20 93.50 0.86%

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