China’s trade data was exceptionally weak in Dec, with exports coming at -4.4% Y/Y and imports printing -7.6% Y/Y, compared with market +2.0% and +4.5% respectively. The disappointing numbers send equities lower with Hong Kong’s Hang Seng down 1.4%, in Australia, the ASX 200 closed marginally lower by 1 point or to 5773.4 recovering from session lows. The Shanghai Composite fell 0.6%, while the South Korean Kospi declined 0.7%.
European stocks also started the session with losses: the DAX in Frankfurt is down 0.31% to 10,887 CAC40 gives up 0.51% to 4,781, and the FTSE is down 0.34%. European Union leaders told Theresa May that the Brexit withdrawal agreement was not open for renegotiation. Bank of Italy, Senior Deputy Governor Salvatore Rossi expressed his concerns on the economic slowdown in Italy; he sees a slowdown in world economic growth, particularly an ‘acute’ slowdown in Italy.
On the Lookout: Tomorrow is a significant day for UK and GBP as it is a day the MPs will vote on the PM’s proposed Brexit deal. On Wednesday we have Chinese new home prices, and we’ll see the Fed’s Kashkari give a speech on the 10th anniversary of the Financial Crisis, which seems appropriate as we chatter about when we get the next one. Thursday has US housing starts and the Philly Fed survey, and Friday has UK retail sales and Canadian CPI, as well as US industrial production, the Fed’s Williams, and Michigan consumer confidence.
Amy Yuan Zhuang, analyst at Nordea Markets, notes that China’s exports fell by 4.4% y/y in December, while imports plunged by 7.6% in dollar terms and eliminated any doubt that the Sino-US trade war is having a painful effect on the Chinese economy.
“Looking ahead, the trade number will likely remain weak in the coming months. We still expect GDP growth to be lower this year than in 2018 but see small likelihood for a sharp slowdown.”
Trading Perspective: EURUSD is trading in a narrow trading range in the Asian session and early European trading. The pair momentum is bullish, and a break above the 100-day moving average can send the prices to previous high at 1.1571. On the downside Friday’s low at 1.1458 will be the first support and 1.1396 will attract more buyers. The daily RSI is hovering on a neutral area, while MACD is flattening above the trigger and zero lines. In EUR futures markets from CME Group, investors scaled back their open interest positions by nearly 3K contracts on Friday from Thursday’s final 526,959. In the same line, volume dropped for the second session in a row, by around 17.7K contracts.
Greek political turmoil ensued as Prime Minister Alexis Tsipras has said he would call a confidence vote in his government this week. This was after his junior coalition partner Panos Kammenos announced on Sunday that he was quitting the government due to his objections with Tsipras on the Prespes name deal which will add pressure to an already battered EUR economy.
USDJPY was under selling pressure in Asian markets and touched the support level at 108, as global growth fears and worst than expected China macro news pushing the Japanese yen higher across the board. Karen Jones, analyst at Commerzbank, USD/JPY pair is likely to remain offered, while capped by the 109.09 resistance and is currently consolidating just below 109.00 levels.
“It is back under pressure, and we would allow slippage back towards the 104.10 spike low. The recent move lower was exhaustive, and we suspect that this will hold for now. A negative bias remains intact while capped by 109.09, last week high. Above here will allow for a retest of the 111.38 the 26th October low. Support at 104.63/10 guards the 100.70 Fibonacci support and the 99.00 2016 low.”