Marketmind: China disappoints again, fueling stimulus speculation – Reuters

A look at the day ahead at Sonali Desai’s European and global markets

China’s long-anticipated May trade data did little to deter markets that have become increasingly accustomed to the easing of momentum in the world’s second-largest economy, though it will fuel further speculation about stimulus from Beijing.

For the record, exports showed a larger-than-expected decline of 7.5% year-on-year, pushing the trade surplus to a 13-month low, while imports remained in negative territory.

While the data had little immediate broad impact, the Chinese yuan weakened at the right time and Europe could see the data in a gloomier light on a day with few domestic catalysts.

Reuters charts

Reuters charts

The Reserve Bank of Australia’s surprise rate hike and aggressive messages on Tuesday continue to reverberate, fueling speculation that the Bank of Canada could similarly defy polling forecasts by resuming rate hikes later on Wednesday, following recent sticky inflation data.

Indeed, RBA Governor Philip Lowe was still explaining Tuesday’s policy decision in a speech to bankers after the central bank wrong-footed economists who predicted a rate break for a second month in a row.

Expectations of a further rise in July dampened the Aussie’s weak Chinese trade data and Australia’s own lower-than-expected first-quarter gross domestic product data.

Equity markets in Asia were mixed, as were US equity futures, following a slightly firmer finish on Wall Street. Light positioning may well persist in next week’s key central bank meeting lineup as the earnings season comes to a close.

One corner of the market seeing volatility is bitcoin, which reversed much of Tuesday’s sharp decline on a flight to quality in the crypto space following a bigger US crackdown on exchanges and smaller coins.

Key developments that could affect markets on Wednesday:

German industrial production in April

Fabio Panetta, Edouard Fernandez-Bollo and Luis de Guindos of the ECB speak at conference on financial integration in Brussels

Klaas Knot of the ECB informs the Dutch parliament about the stability of the financial sector

The OECD updates the global economic outlook

US April trade and consumer credit

Bank of Canada policy decision

Reporting by Sonali Desai; Edited by Edmund Klamann

Our Standards: The Thomson Reuters Principles of Trust.

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