Morning Commentary: China’s Economic Rebound – Seeing is Believing

A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.

China’s Economic Rebound – Seeing is Believing Share this story: Alan Rose Foreign Exchange Senior Trader

In the first nine months of 2018, Chinese equities fell by nearly 25% as the U.S. imposed $250 billion of tariffs on a wide range of Chinese exports in the hopes of striking a new and improved trade pact with China. The Chinese economy and much of the world economy began to slow as evidence of the tariffs began to bite as a slowdown in the Chinese economy affects almost all trading partners. But, the Chinese took proactive steps on both monetary and fiscal policy to help stimulate the economy, and those steps appear to paying dividends as the economy is showing signs of stabilizing.   Last night’s Chinese economic data regarding GDP, retail sales and in particular, industrial production (strongest pace of growth in five years) all came in stronger than forecast. The net result of these better-than-expected numbers has been to set off a mild chain reaction of risk-on sentiment with global equities, commodities, and interest rates all moving in lock step to slightly higher levels. The U.S. dollar (DXY) is slightly weaker with many commodity-linked currencies and emerging market currencies moving higher.   The one downside effect of a Chinese economy that is stabilizing is regarding the current trade negotiations going on between China and the U.S. Last year, the imposition of the U.S. tariffs was supposed to strongly impact the Chinese economy and thus result in China making trade concessions resulting in a more favorable deal for the U.S. With the Chinese economy stabilizing, there is a less imperative need on China’s part to make as many concessions as there once was, and this helps to explain why the trade talks continue to drag on with no particular end in sight. HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT: The New Zealand dollar is one of the few currencies to have weakened overnight on the back of weaker-than-expected Q1 GDP. GDP was expected to rise by 1.7% YoY but came in at 1.5%. Kiwi interest rates are much lower on the session causing the Kiwi to weaken sharply today. The U.S. posted a better-than-expected trade balance report for February with the deficit coming in at $49.4 billion (eight-month low) against expectations of a deficit of $53.4 billion. A combination of factors helped to contribute to the improvement. U.S. civilian plan exports surged, and there was a sharp decline in the trade deficit with China. Exports to China rose by $1.6 billion while imports fell by $1.5 billion bringing the total trade deficit with China to $30.1 billion.

If we can help you with any Foreign Exchange needs, please email foreignexchange@cnb.com or call (800) 447‑4133. Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos!

Follow City National Bank on social media:

Non-deposit investment products: • Are not FDIC insured, • Are not deposits or other obligations of City National Bank and are not guaranteed by City National Bank, and • Are subject to investment risks, including possible loss of the principal invested. This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. City National Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.

Unsubscribe from this list  |  Update email preferences This message has been sent to bank@banking.offers.report. Please do not reply to this email. To ensure the delivery of future emails, please add foreignexchange@emails.cnb.com to your email address book or safe sender list. Copyright ©2019 City National Bank – All Rights Reserved. 350 South Grand Avenue, 12th Floor, Los Angeles, CA 90071 City National Bank is a subsidiary of Royal Bank of Canada. TERMS & CONDITIONS  |  PRIVACY STATEMENT NMLSR ID# 536994 | City National Bank Member FDIC