Data from China and the US, world trade is at crisis point

18 apr 2019

The statistics from China was the main news event of yesterday. It seems that government measures to stimulate the economy have taken effect. Retail sales and industrial production were much higher than analysts' forecasts of 8.7% and 8.5%. As a result, GDP growth was also pleasantly surprised: 6.4% quarterly growth, with market expectations of 6.3%.

The progress in the negotiations between the US and China the result is the decline in gold and the Japanese yen and it looked quite logical and reasonable. But we are still not in a hurry to sell gold. At least today. Moreover, the negotiations are rumors, and the facts are that in the fourth quarter of 2018, world trade fell by 1.8% q / q, which was a record value in the last ten years since the global financial crisis.

According to The Telegraph, the recent downturn in world trade is similar to the dot-com bubble collapsed in 2001. Over the past almost 20 years, things were worse only in 2007–2008, when the volume of world trade fell by 12.7%.

The dollar “received support” from data on the US trade balance. The deficit turned out to be less than experts had expected: - $ 49.4 billion with the forecast - $ 53.4 billion.

We were pleased with the markets and data on the trade balance of Canada, which also came out better than expected. So the main beneficiary of the news of yesterday was the Canadian dollar, which strengthened well, although at the end of the day lost most of the gains. Recall that for the Canadian dollar, which is a typical commodity currency, positive news from China, coupled with positive macroeconomic statistics and high oil prices create almost perfect conditions for growth.

Yesterday's news background is generally favorable for commodity markets. But oil was not able to take advantage of this and dropped at the end of the day. We consider this as a signal that the market correction has already matured. Accordingly, while asset quotes are at the local top, we decided to roll over from buying to sales. However, if oil resumes its growth (it will be able to consolidate above 64.50). So today we sell oil with stops above 64.50.