Japanese exports disappoint, GBP calm after tumultuous Tuesday

Summary:

• Japanese trade data for April showed another decline in exports
• US reportedly considers to blacklist a Chinese surveillance technology firm
• British pound little changed after hectic Tuesday’s trading

Weak signs from Japanese trade

Japanese exports declined in April, this was especially true when it comes to China. Source: Bloomberg

During Japnese trading hours we were offered several readings including trade data for April. This kind of data has become yet more important recently on the back of the ongoing trade tensions between the US and China (other Asian economies are affected as well). The report showed Japanese exports slumping 2.4% in annual terms, after falling at the same pace in March. It was the fifth consecutive decline of exports on that basis. What could be more worrisome is the fact that Japanese exports to China decreased 6.3% compared to the same period last year, after declining 9.4% in the previous month. Although the statistical base effects played some role here, there is no doubt that exports activity in Japan has lost steam of late. On the other hand, imports picked up 6.4% YoY, beating the median estimate of a 4.5% YoY increase. As a result of disappointing exports, a trade surplus narrowed to 60.4 billion JPY from 527.8 billion JPY in March. In turn, a positive surprise came from the core machine orders for March which rose 3.8% MoM, above expectations pointing to a lack of any move. While this data looks quite well, one cannot forget that it is a lagging indicator and March turned out also very upbeat in China (these moves were reversed in April).

Revelations from trade front

There is no doubt incoming reports regarding the trade dispute between the world’s two largest economies are among the most important things steering the financial markets right now. Over the past hours we got two quite contradictory news. The first came from Chinese ambassador to the United States who said that China was ready to continue trade talks in order to address a trade imbalance issue. He also added that the US changed its mind more than one while China was still committed. While this news could be considered as slightly positive, another one is not. Namely, the Trump’s administration is reportedly considering to blacklist a Chinese surveillance technology firm, a NY Times article says. As you may see, after easing strains concerning Huawei (the US granted a 90-day license to some domestic companies allowing them to keep doing business with the Chinese company), the US does not seem to back down at all. That is another downside risk market participants need to take into account. So far, Chinese equity markets are trading slightly lower on Wednesday after decent gains on Wall Street.

Although the falls in Chinese stock markets are not so profound today, a technical landscape does augur nothing good. The price failed to come back above 10580 points yesterday, hence space for further decline seems to open. Source: xStation5

Up and down on GBP

After Theresa May came up with a proposal of another meaningful Brexit vote yesterday, the British currency popped noticeably. However, this move was not long-lasting and then the pound erased its gains after Jeremy Corbyn made it clear - the Labour will not back a May’s withdrawal agreement bill. He said that “...what the Prime Minister calls her new Brexit deal is effectively a repackaging of the same old bad deal, rejected three times by parliament”. Let us remind that May offered a vote on a second Brexit referendum if her deal gets approval as well as a temporary customs union with the European Union until the next general election. Having in mind that her deal is very likely to be rejected once again (it is uncertain whether the fourth vote on her Brexit withdrawal takes place at all), there is a higher possibility that she will step down soon.

Technically the pound continues its impressive downtrend. Do note that the price is currently hovering in the vicinity of the important technical support. Should this line be broken, then a move toward 1.25 could be on the cards. Source: xStation5

In the other news:

• New Zealand’s retail sales (in real terms) for Q1 rose 0.7% QoQ, beating the median estimate of a 0.6% QoQ rise

• Australian construction work done in Q1 declined 1.9% QoQ, the number proved to be far worse than expected (a flat reading had been anticipated)