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China’s December Trade Data Is, Well, Not Great…

"Juuust a bit outside." 

Well, December trade data for China is out and as you might imagine, these numbers are being eyed closely amid the ongoing economic deceleration evidenced by, among other recent data points, the official and Caixin manufacturing PMIs which just fell into contraction territory.

At first glance (and it looks like that’s all you really need here, although there’s always some nuance to be had I suppose), things don’t look great.

December exports fell 4.4% YoY, markedly worse than consensus (2% rise) and near the low end of the range as set out by nearly two-dozen economists. Imports, meanwhile, plunged 7.6% YoY, missing the median of a 4.5% rise by a country mile and printing well below the lowest estimate.

ChinaExportImport

(Bloomberg)

So, yeah: “juuust a bit outside.” 

For reference, Goldman was thinking +4.5% YoY for exports while Barclays was predicting a flat read.

The yuan (which, you’re reminded, is coming off a stellar week), aggressively pared an opening rally that had sent the onshore spot to the strongest against the dollar since July.

Yuan

 (Bloomberg)

It’ll be interesting to see what everyone has to say about this after folks have had a few hours to digest it. It certainly seems as though whatever juice the data was getting from the scramble to get out ahead of the tariffs has now been squeezed out.

As alluded to above, this comes hot on the heels of one of the best weeks for the yuan since 2005, a scenario that reportedly has the PBoC on edge. December’s trade data would appear to add some urgency for Beijing when it comes to making sure the yuan doesn’t appreciate too rapidly in the face of a slumping dollar and a dovish Fed. Here’s how we described the dilemma on Friday:

Recent yuan appreciation is a double-edged sword for China. On one hand, it’s a negative for the export-driven economy which is already sputtering. On the other hand, it helps alleviate capital flight concerns and gives the PBoC more scope to ease. But even that has a kind of question-begging character to it – that is, yuan strength predicated on a less aggressive Fed and thereby less policy divergence, gives Beijing scope to ease which would negate the Fed’s dovish pivot, driving the policy divergence wider again, begetting yuan weakness and stoking capital flight concerns.

Today’s trade data just adds to the mounting body of evidence that suggests the global economy is rolling over and it would appear to amplify and validate the message conveyed in Apple’s “shock” guidance cut.

One assumes this will argue for more easing and presage more hints at fiscal stimulus on top of everything that’s already been announced lately (e.g., the RRR cut and incessant references to incremental measures designed to bolster small businesses and provide tax relief).

Bottom line: this isn’t the best news at a time when worries about global growth are the talk of the proverbial town and it looks like the trade balance came in ahead of consensus too, which could potentially exacerbate trade tensions. My guess (and I’m not even going to bother digging too deeply into this until tomorrow) is that this bodes ill for tech stocks globally, but we’ll see.



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1 comment on “China’s December Trade Data Is, Well, Not Great…

  1. Will it be quickly dismissed by “the market” with the thought that it’s a trade spat related blip that is sure to correct itself starting in March, or will this trigger the slump back to 2351 (and below) on the SP500?

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