- All eyes are on the ECB and BoE meetings - we do not expect changes to current policy.
- Strong Chinese trade data support Asian markets this morning.
- JPY continues to weaken on expectations of monetary policy easing from the BoJ.
Stronger-than-expected Chinese trade data and continued healthy money supply growth have supported Asian stock markets this morning. Chinese exports rose 14.1% y/y in December, beating consensus expectations of only a 4.6% increase and up from only 2.9% in November. Imports rose 6.0% after being flat in November.
The lift in exports suggests that the improvement in the Chinese economy, which has so far largely been driven by domestic demand, is now getting a helping hand from increasing global demand. This supports our general view that the recovery in China will proceed in a moderate pace in the first half of this year. The ongoing weakening of JPY also paved the way for more gains in Japanese stocks and has lifted the Nikkei this morning.
In US markets, yesterday was uneventful. The S&P 500 ended the day 0.3% higher. The US Treasury market saw further small gains after the sell-off in the first week of the year. The 2-year yield was down 1bp and the 10-year yield 2bp.
In FX markets JPY has continued to weaken on expectations of monetary policy expansion from the Bank of Japan, as Prime Minister Abe has urged the central bank to double its inflation target. AUD strengthened on the signs of accelerating growth in China in today’s trade data. EUR/USD has been broadly stable overnight and so have the Scandinavian currencies.
Jack Lew was nominated as US treasury secretary yesterday to replace Timothy Geithner. Yesterday, the US administration also publically signalled its concern that Britain would exit the EU with Cameron’s plan to renegotiate Britain’s EU membership terms and put it to a referendum.
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