China Trade Data Bolsters Markets
Shares rose on Thursday on Wall Street, bolstered by a better-than-expected labor market report and upbeat merchandise trade data from China.
Thursday, May 8, 2014 - 00:00
The fillip in the stock market pushed the Dow Jones Industrial Average beyond its record closing price that was set at the end of last month. China’s merchandise trade surplus came in at $18.46 billion for April, rising $7.72 billion from March, which was just slightly higher than had been expected. Expectations for that rise, though, had been based on forecasts of declines in both imports and exports, which proved to be off the mark as exports grew 0.9% on the year, including a 12.0% jump in exports to the US, while imports rose 0.8%. There have been some worries in recent months over a slowing in the Chinese economy, but this latest data set should provide some reassurance that the global economy is stoking external demand and providing support to China’s growth.
On the domestic front, initial jobless claims fell 26,000 last week to 319,000, coming in comfortably below the consensus estimate, which had pointed to 330,000. This is another piece of evidence that the jobs market is shaking off the adverse effects of the winter freeze, though the four-week moving average drifted higher to 324,750 from 320,250 in the week prior. By late morning in New York the leading stock index benchmarks had moved higher, with the S&P 500 index gaining 0.52% to 1888.1, while the DJIA rose 0.42% or 68 points to 16,587. The NASDAQ 100, which struggled yesterday while the S&P and Dow Jones climbed, advanced 0.95% today to 3579.7.
Interest rate decisions from two major central banks have been attracting the attention of forex traders this morning. The euro retreated from a two-and-a-half-year high after European Central Bank (ECB) President Mario Draghi re-iterated concerns over the strength of the shared currency in his press conference following the latest unchanged rate decision for the eurozone. Mr Draghi intimated that action could be taken by the ECB at its June meeting. ‘The Governing Council is comfortable with acting next time, but before we want to see the staff projections that will come out in the early June,’ he said, adding that the strength of the euro alongside low inflation is ‘cause for serious concern.’
EUR/USD had risen as high as 1.3993 earlier today, the highest level since October 2011, before sinking to 1.3865, down 0.33% on the day. The British pound was largely unchanged against the dollar by midday in New York, following the Bank of England’s decision earlier in the session to maintain its benchmark rate at a record low of 0.5% while making no change to its quantitative easing program. While widely expected, the decision did come hot on the heels of a warning from the Organization for Economic Co-operation (OECD) that UK house prices ‘significantly exceed long-term averages relative to rents and household incomes’ and that any tightening in monetary policy should ‘be accompanied by timely prudential measures to address the risks of excessive house price inflation’. Aside from house prices, though, the UK shows few inflationary pressures, giving Governor Mark Carney latitude to focus on the slack in the economy and keep rates low, at least for the time being.
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