China Trade Numbers Lift Market Sentiment

Better-looking data out of China is helping market sentiment in today’s session, with oil off its multi-year lows and the major indexes on track for a positive start. Hard to tell how long this mood will last as no one sees today’s Chinese data as a sign of enduring shift.

China’s December trade numbers came in better than expected, with both exports and imports falling less than expected in dollar terms. Exports were down -1.4% in dollar terms in December, which compare to estimates of an -8% decline, according to a Wall Street Journal consensus of 15 economists.

Imports were similarly down less, declining -7.6% in dollar terms in December from the year-earlier period. Trade declines were much bigger in November. The December export rebound isn’t likely a function of a turnaround in demand for Chinese goods but rather due to companies rushing to meet year-end orders. The recent depreciation in the Chinese currency should help exporters’ competitive position to some extent going forward, provided it isn’t matched by others in the region.

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Today’s data notwithstanding, China’s status as a source of market uncertainty isn’t going away anytime soon. The country’s manufacturing and trade sectors have clearly lost momentum, which has been weighing on overall GDP growth data.

The country’s leadership has been trying to steer the economy towards services and domestic consumption, though the shift will take time to fully take effect. While recent data shows a lot more momentum in the country’s consumer spending trends, which is also borne out by anedotal evidence from operators like Starbucks (SBUX), Nike (NKE) and others, no one expects this shift to take place quickly or smoothly.

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