Daily Agenda: Markets Digest Chinese Trade Data

Trade data for May released on Wednesday by China’s General Administration of Customs was mixed, with exports declining by more than 4 percent year over year but imports contracting only 0.4 percent versus May 2015, which suggested solidifying demand. Critically, in local currency terms, inbound shipments expanded on a year-over-year basis for the first time in two years. In a statement also issued this morning, People’s Bank of China researchers reiterated a forecast for gross domestic product at an annualized 6.8 percent, as increased stimulus measures are expected to boost overall activity. With signs that stimulus measures in China may be starting to yield results, a primary question on investors’ minds is whether rebounding growth will be sufficient to offset fears over high debt levels.

Japanese GDP improves. Revised-gross-domestic product data released by Japan’s Cabinet Office today revealed that the economy grew at a brisker pace during the first quarter than initially estimated. The annualized reading of 1.9 percent versus the initially reported 1.7 percent provides some solace for policy makers at the Bank of Japan and the administration of Prime Minister Shinzo Abe as they struggle to combat deflationary pressures. Last week the government announced a delay on a sales-tax increase out of concern over its impact on growth.

Bund yield makes fresh lows. The yield demanded by creditors for debt issued by the German government reached new historic lows in trading this morning with the 10-year bund reaching 0.033 percent. Today marks the start of corporate-debt purchases by the European Central Bank as it expands quantitative easing into new asset classes. Despite the compression in rates, volatility in euro currency pairs remained muted in early trading.

Authorities raid Olympic contractors. In the latest setback for the upcoming Summer Olympic games in Rio de Janeiro, federal authorities in Brazil staged a raid at the massive Deodoro Sports Complex on Tuesday as a corruption probe into kickbacks from the project threatens to engulf the city’s government. Separately on Tuesday, organizers for the games held a press conference downplaying risks associated with the Zika virus as Rio prepares for a massive influx of foreign tourists.

Clinton wins California. On Wednesday morning, multiple media outlets declared former Secretary of State Hillary Clinton victorious in the California Democratic presidential primary, cementing her nomination despite pronouncements by Senator Bernie Sanders that he will remain in the race. Clinton reached out to Sanders supporters during recent speeches as she attempts to unify the party in preparation for the general election against Donald Trump.

IEA slashes gas demand estimates. In a report issued on Wednesday, the International Energy Administration reduced its global demand outlook for natural gas for the fourth consecutive year. The revised forecasts for an annualized growth rate in demand of 1.5 percent through 2021 reflects a combination of low oil and coal prices as well as a supply glut in North America.