Australia Trade Balance Surged As Gold Exports Increased
Australia’s trade data for January scored a surplus of USD1.433 billion, which is 5 times more than market’s expectation of a USD270 million surplus.
The data looks solid across the board but the huge 44% or USD425 million of increase in non-monetary gold exports is astounding. Equally the 27% or USD95 million falls into non-monetary gold imports; which is an additional positive for the trade balance.
Rural goods rose 5% to USD3.802 billion with meat and meat preparations up to 11%. Non rural goods rose 3% to USD19.866 billion. The Asset-backed Securities (ABS) only provide limited quantity of commodities and unit value analysis only in the original terms, but it is clear that iron ore volumes fall 16% in lump and 10% in fines, while their prices only increased 4% and 2% respectively. Looking at coal, hard coking managed to rise 2% in quantity and 3% in price but semi-soft and thermal saw declines in volume of 14% and 20% respectively.
On the imports side of the ledger, goods and services debit rose 1% to USD28.327 billion with an 8% increase in merchandise goods, but capital goods fell for 9%.
Aussie jumped for a fourth day on better-than-estimated economic data, and China’s Yuan headed for its biggest two-day advance in two years as crude oil extended declines. Asian stocks climbed while the Yen fell as a government panel said that Japan’s public pension fund can shift its focus from domestic bonds.
In China, the pattern for 2014’s policy will probably be a continuation of the current stop-go approach. During this period of robust growth, the People’s Bank of China (PBOC) has given leeway to push borrowing costs higher in order to contain excess lending and wasteful investments. If growth falls below the government’s red line, deleveraging will go on hold. A steep build up in local government and corporate debt is a major risk for China’s economy and financial system. Even with low central government debts and almost all of China’s domestic debts, the government will be able to manage the problem over a number of years. The concern here is the undisciplined approach that allows credit and investments to run further out of control thus risking a potentially extreme recovery further down the road. China’s ratio of household and corporate debt to Gross Domestic Product (GDP) exploded close to 200% in 2013 from about 125% in 2008. Investment as a share of GDP rose close to 50%.
However the long term Aussie’s outlook is still looking bad, as the Dollar will easily outperform other major currencies in the coming year, driven by demand for U.S. assets prompted by a shift in the Federal Reserve (Fed) policy.
After cutting its USD85 billion of monthly asset purchases by USD10 billion twice since December, the Fed had clearly signalled its intentions of closing its quantitative easing programme this year. Real interest rates in the U.S. are going to rise and that is certainly going to decrease capital flow from outside of the U.S. into other economies
Top News Today
European Central Bank (ECB) rate decision
I expect figures to come in at 0.25%
U.S. Initial Jobless Claims
I expect figures to come in at 350K
Previous Daily Market Report: Daily Market Report for 5 March 2014: China Maintains Its Gross Domestic Products (GDP) Target At 7.5% In 2014