Good morning. Here's what you need to know.
Chinese exports tumble. Chinese exports fell 18.1% from a year earlier in February after logging a 10.6% gain in January. Imports rose 10% from a year earlier in February, causing China to report the first monthly trade deficit since March 2013. The weakness likely owes to the Lunar New Year holiday and inflated trade invoicing, which obscures the data. "Despite our belief that the actual trade situation is better than official data suggests, the disappointing February trade data is negative for the Chinese yuan (CNY) and the GDP growth outlook for Q1 2014," say economists at Standard Chartered.
Chinese inflation disappoints. China's consumer price index rose 2.0% from a year earlier in February, slowing from January's 2.5% year-over-year pace of growth and missing market economists' consensus forecasts for a 2.1% rise. China's producer price index, meanwhile, fell 2.0% from a year earlier, marking an accelerated decline from January's 1.6% year-over-year drop and missing forecasts for a 1.9% decline.
Copper falls. Copper futures slid more than 4% overnight in reaction to the news out of China. However, the metal has since rebounded and futures are trading near $3.03 a pound, down only 1.8%.
Quiet markets. Futures point to a quiet open to begin the week in North American trading. S&P 500 and U.S. Treasury note futures are little changed from Friday's close, and the U.S. dollar is flat against the euro and the yen. European indices are mostly higher with the exception of Germany's DAX. Overnight, the Japanese Nikkei 225 fell 1.0%, the Hong Kong Hang Seng fell 1.8%, and the Shanghai Composite fell 2.9%.
Japan GDP growth revised down. Revised GDP data suggest Japan's economy expanded only 0.7% at an annualized pace in the fourth quarter of 2013, down from the previous 1.0% estimate. Downward revisions to business investment growth (to 3.0% from 5.3%) and consumer spending (to 1.6% from 2.0%) were the main drags on the headline number.
Record Japanese deficits. Japan also announced a record current account deficit in January of ¥1.589 trillion. The deterioration in the current account owed largely to the trade deficit, which widened to ¥2.345 trillion fom ¥1.047 trillion. "Rush demands before the consumption tax increase next April are pushing imports up and resulting in the deterioration of the balance of payments," says Osamu Takashima, a Citi strategist who believes the widening deficits are supportive of the U.S. dollar against the Japanese yen.
Euro zone investor confidence hits 35-month high. A survey of euro zone investor confidence conducted by market research firm Sentix revealed the highest confidence in 35 months. The report's headline index advanced to 13.9 in March from February's 13.3 reading. Still, market economists were looking for a slightly more sanguine take — the consensus forecast was that the index would rise to 14.0 this month.
Cross-border lending contracts. The latest data from the Bank for International Sentiments revealed a continuing decline in cross-border bank lending in the third quarter of 2013. "International banking activity was characterised by lower credit to both banks and non-banks in the third quarter of 2013, mirroring developments in the previous quarter," said the BIS in its Quarterly Review published Sunday. "Cross-border claims on banks fell by $466 billion (2.7%). Inter-office positions accounted for most of this contraction, continuing the steady decline that began in late 2011. The retreat in cross-border interbank activity was most pronounced for claims on banks in the euro area ($205 billion or 4.2%), United Kingdom ($250 billion or 7.8%) and offshore centres ($35 billion or 1.7%)."
Russia tightens its grip on Ukraine. Pro-Russian military forces tightened their grip on Ukraine's Crimea region over the weekend, seizing an airfield and turning back international watchdogs who tried to enter the region. "Ukraine remains very much a potential dampener of market risk appetite and, by extension, a trigger for safe haven flow," write Rabobank interest rate strategists in a note to clients this morning. "For now, though, the market looks to still be adopting a sanguine approach to the ongoing Ukrainian debacle as evidenced by the dip in oil prices (softer Chinese exports informing the market rather than any possible concern over possible disruption to the transit of European energy imports across Ukraine)."
ECB not happy with euro strength. ECB Governing Council Member and Bank of France Governor Christian Noyer said this morning that the ECB is not happy with the euro's recent strength. "It’s a very important input in the economic development and inflation development," Noyer said in a Bloomberg Television interview with Manus Cranny in Paris. "When the euro tends to strengthen, it creates additional downward pressure on the economy and inflation, which in both cases isn’t warranted. So we’re not happy at the moment." The Governing Council declined to announce any new policy action at the conclusion of its monthly meeting last week, and the euro is little changed on Noyer's comments.
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