Daily Market Color

Strong Chinese Trade Data Boosts Global Equity Markets

US stocks are extending this week’s earlier gains while Treasuries are mixed today after upbeat Chinese trade data overshadowed mediocre US retail sales.  The better-than-expected trade data out of China raised hopes that the world’s second largest economy is on more solid footing than markets had been forecasting.  Exports surged 11.5% in March, the first increase since June, and easily beat expectations of +2.5%.  Additionally, imports slowed less than expected, adding to the positive sentiment from the report. 

The Chinese trade data helped markets overlook disappointing US retail sales.  The headline number unexpectedly fell last month (-0.3%a vs 0.1% exp.), led by a drop in demand for car purchases.  Consumer spending has been the main driver of growth in the US for the past several years, so a prolonged slow down would certainly impact GDP growth prospects.  On the bright side, both January and February sales were upwardly revised, so overall consumer spending in the first quarter shouldn’t be dramatically different than forecast.  Separate data showed a surprise drop in producer prices, as a decline in the cost of services offset the recent bounce in energy prices.  Slowing consumer spending and soft inflation data support the Fed’s recent more cautious narrative when it comes to raising rates.
Aside from the data, there is a $20 billion 10-year note auction today and heavy agency issuance, while the Fed is scheduled to release its latest Beige Book commentary on current economic conditions this afternoon.  All three major US stock indexes are currently up nearly 1%, while both the Treasury curve and swap curve are flattening marginally.  Both WTI and Brent crude are down less than 1%.

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