Poor trade balance figures from China sent a shudder across global money markets as mixed messages from the US and Europe gave analysts had already sent traders reeling.
The Chinese trade balance plummeted from an estimated 35.10 billion yaun surplus to an actual 25.1 billion yuan – a massive under performance that cements concerns the Chinese economy that has so long powered the rest of the world is heading for a hard landing.
China must come to terms with a number of issues – infrastructure projects that fuelled the economy and employment are coming to an end, while a richer population is looking for credit to fund personal spending.
Externally, the traditional markets for Chinese products in the US and Europe are drying up as no one has spare cash to spend, while other emerging markets are squeezing China on quality or price. exports to the European Union slumped 16%.
Poor figures
“This has led some economists to believe stronger policy easing is imminent and likely within days rather than weeks, as previous measures are failing to keep their economy and key markets afloat,” said forex expert Ashley Skinner of Currencies Direct.
He explained exports increased 1% year-on-year below forecasts of 8.6% and 4.7% rise in annual imports but is still short of the forecast of 7.2%.
“The poor figures have had an immediate effect on world stock and equity markets with them falling across the board in Asian and opening European trade,” said Skinner.
“We have seen a rally in the US Dollar off the back of this with Pound and Euro remaining relatively unchanged. The Euro v Dollar has been moving around from the volatility and without the firm European Central Bank measures to help prevent another run on the Euro.
German inflation
“German inflation was in line at 1.7% year-on-year is not helping the plug the leak in EUR/USD with more opposition from the German central bank over the sovereign bond buying scheme of indebted nations of interest.”
Following the bleak analysis of the UK’s economic performance, British trade balance data added more disappointment to an unfavourable week for the Pound. The data showed an increase in the trade deficit after a positive run last month with a figure of £10.1billion down.
“The situation is now calling for more proactive measures from the government to tackle this issue and also to find more sustainable and long term export markets outside of the EU with George Osborne confirming the government can now focus 110% on finding growth,” said Skinner.
US trade deficit
“This is in stark contrast to the better then expected fall in the American trade deficit figure with a figure of -$42.9 billion being tallied up versus the -$47.5billion expected and shaving off $5.1billion on the June figure. Also jobless claims better than expected with a 6k drop against last month’s figure of 367k.
“The poor figures have had an immediate effect on world stock and equity markets with them falling across the board in Asian and opening European trade.”
