Markets fade on Chinese trade

Chinese trade stutters, sending markets lower.

London Stock Exchange
Source: Bloomberg

Global indices pulled back today as the misfiring Chinese economy continued to draw blanks as trade data highlighted a circa 20% drop in imports, coupled with a 3% fall in exports. Markets have grown used to underperforming Chinese data and thus today's data was no surprise. However, it did show the path continues to be one of deterioration and a recovery seems out of sight – for now.

As UK year-on-year inflation hit negative territory for only the second time since 1960, the impact of persistent disinflation upon BoE decision making will no doubt have been playing into traders mind-sets, sending GBP/USD 130 points lower within two hours. However, it is also worth bearing in mind that with wages growing at the fastest rate in over a decade, this is a benefit for the consumer and helps make up for all those years where real wages fell repeatedly. That said, the recent rise in wages and productivity needs to start impacting inflation or else the next BoE move could be to cut rates, not hike them.

The German ZEW sentiment survey plummeted once mor, following the fallout of the Volkswagen crisis, which hit confidence in what has always been deemed a Teflon industry in terms of PR. This is the seventh consecutive fall which leaves the measure teetering on the cusp of a negative reading, denoting pessimism.

Unfortunately we have seen little evidence that the eurozone is really returning to strength and despite QE being front loaded, the impact seems to be so minimal that we are already discussing the expansion of the programme after seven months.

No-one likes to celebrate the misfortune of others, but today investors cheered at the expense of 336 Twitter employees who lost their jobs in the first shakeup the firm has seen since Jack Dorsey was confirmed as the permanent CEO. For investors, this was as much about Dorsey being seen to be taking steps to stop the rout that Twitter shares have found themselves in throughout 2015. Cutting costs is one thing, but now he has to find revenue sources to grow the bottom line and not just the user base.

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