China’s ex­port con­trac­tion jolts stock mart in­vestors

Business World - - World Markets -

SYD­NEY — Asian shares and US stock fu­tures skid­ded on Mon­day af­ter a shock con­trac­tion in Chi­nese ex­ports pointed to deep­en­ing cracks in the world’s sec­ond­biggest econ­omy and raised fears of a sharper slow­down in global growth and cor­po­rate prof­its.

E-minis for the S&P 500 de­clined 0.8%, in an in­di­ca­tion of height­ened risk aver­sion. Spread­bet­ters also pointed to a weak start for Europe while FTSE fu­tures slipped 0.4%.

Lat­est data from China showed im­ports fell 7.6% year-on-year in De­cem­ber when an­a­lysts had pre­dicted a five per­cent rise while ex­ports un­ex­pect­edly dropped 4.4%, con­found­ing ex­pec­ta­tions for a three per­cent gain.

The dis­ap­point­ing num­bers re­in­forced fears US tar­iffs on Chi­nese goods were start­ing to take a heavy toll on China’s cool­ing econ­omy.

Soft­en­ing de­mand in China is al­ready be­ing felt around the world, with slow­ing sales of goods rang­ing from iPhones to au­to­mo­biles, prompt­ing profit warn­ings from the likes of Ap­ple and Jaguar Land Rover.

The Aus­tralian dol­lar, a key gauge of global risk sen­ti­ment and a liq­uid proxy for the Chi­nese yuan, top­pled from Fri­day’s onemonth peak of $0.7235 to $0.7186 af­ter the dis­mal data.

“We be­lieve trade growth next year will slow sig­nif­i­cantly on huge un­cer­tainty and high base,” Citi an­a­lysts wrote in a note, pre­dict­ing China’s ex­ports and im­ports to fall 5.1% and 6.8% re­spec­tively this year.

“Sig­nif­i­cant un­cer­tainty re­mains as to whether there could be a ‘deal’ af­ter March 1.”

Those con­cerns sent MSCI’s broad­est in­dex of Asia-Pa­cific shares out­side Ja­pan slid­ing one per­cent from Fri­day’s one-anda-half month top for its big­gest sin­gle-day per­cent­age drop since Jan. 2, with Chi­nese and Hong Kong shares the worst hit.

Liq­uid­ity was gen­er­ally light dur­ing Asian hours as Ja­pan was on pub­lic hol­i­day.

Chi­nese shares were in the red, with the blue-chip in­dex down 0.7%. Hong Kong’s Hang Seng in­dex stum­bled 1.5% while Aus­tralian shares re­versed early gains to end mostly flat.

Some an­a­lysts ex­pect Mon­day’s trade data to pro­vide im­pe­tus to Chi­nese au­thor­i­ties to re­solve the trade dis­pute with Washington.

“You could ar­gue that the worse the num­bers are the more in­cen­tive it pro­vides to re­solve the dis­pute,” Ray At­trill, forex strate­gist at Na­tional Aus­tralia Bank, told Reuters.

“It also am­pli­fies the ex­tent to which they (Chi­nese pol­icy mak­ers) have to pro­vide stim­u­lus for the do­mes­tic econ­omy,” Mr. At­trill added.

The world’s two largest economies have been in talks for months now to try and re­solve their bit­ter trade war, with no signs so far of any sub­stan­tial progress in ne­go­ti­a­tions.

Citi an­a­lysts said even with the ris­ing prob­a­bil­ity for both sides to reach an agree­ment, the tar­iff and trade dis­rup­tion ap­pears to have al­ready rip­pled through the global econ­omy.

“The re­gional trade growth ap­pears to have slowed sub­stan­tially af­ter front-load­ing ef­fect di­min­ished,” they said. —

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