Chinese Trade Data Highlights Growing Deficit
Stocks on Wall Street bounced back on Tuesday after finishing in the red on Monday.
By Peter Martin
Tuesday, March 11, 2014
The previous losing session was dominated by weekend trade data from China that showed a surprise widening of the country’s trade deficit, driven by an unexpected decline in exports, which sparked concerns about the state of the global recovery. Risk sentiment is also being plagued by simmering tensions surrounding the situation in Ukraine, with Secretary of State John Kerry refusing to meet Russian President Vladimir Putin unless Russia respects Ukraine’s territory and pushes back on a referendum to determine Crimea’s fate, among other demands. Should the referendum go ahead, the chances of a diplomatic solution being reached between the US and Russia would be slight, and would pave the way for an escalation in sanctions against Russia.
Despite these worries over the Ukrainian crisis, the stock market crept higher on Tuesday, with the S&P 500 gaining 0.16% to 1880.2 by late morning in New York, still just a few points from its all-time high. The Dow Jones Industrial Average rose 0.21% or 35 points to 16,454. The Ukrainian situation still appears to be fuelling demand for safe-haven instruments though, with gold gaining 0.6% to $1346 per troy ounce. Silver gained 0.67%.
The US economic calendar was just about blank on Monday and still quite sparse on Tuesday. The two significant releases were wholesale inventories and the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS), both for January. Wholesale inventories rose 0.6% while sales tumbled 1.9%, which has had a big effect on the stock-to-sales ratio, pushing it up to 1.2, one of the higher readings for the last few years. This report is not a big market mover, but nevertheless it does not make for cheery reading. We will have more information in this area with Thursday’s business inventories, which includes manufacturers, wholesalers and retailers (today’s report focuses solely on merchant wholesalers, as its name suggests). We also have retail sales on Thursday, which is one of the more important reports of the whole week.
JOLTS showed job openings rising to 3.974 million in January, up from December’s downwardly-revised 3.914 million openings (reported last month as being 3.990 million), while a hiring rate of 3.3% and a separations rate of 3.2% were little different from those seen in December. Overall this suggests stability in the labor market from December to January, which is not hugely encouraging given December was a soft month in terms of jobs growth.
In the forex market, USD/JPY was little changed after the Bank of Japan decided at its latest policy decision meeting to leave its key interest rate unchanged (effectively at zero) and maintained its target of expanding the monetary base at an annual pace of 60 to 70 trillion yen, as was widely expected.
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