Chinese Trade Falls Unexpectedly, Global Slowdown Weighs On Equities, Earnings Season Starts In US

China Trade Data Shows Contraction As Tariffs Curb Activity

Most major Asian-based equity indices fell on Monday as Chinese trade data shows the impact of tariffs is far larger than anticipated. The data shows slow down in both imports and exports but should be taken with a grain of salt. The data is for December and a time in which trade relations were tenser than now. Since then trade talks have advanced to a high level and the threat of additional tariffs is at bay.

Chinese imports fell -7.6%, exports -4.4%, while experts had expected them to rise 5.0% and 3.0% respectively.

The Hong Kong Heng Seng index led the decline with a loss of -1.38%. The Heng Seng is particularly sensitive to the Chinese trade date because most of China’s international business is routed through it. The Shanghai Composite fell as well but a more tepid -0.71%. Other losers in the region were the Korean Kospi with a decline near -0.50% and the Australian ASX with a loss near -0.03%. The Japanese Nikkei was able to advance nearly 1.0%.

Chinese Trade Data Pressures EU Market Lower

The weak trade data from China put pressure on global equities and had the EU market down more than -0.50% at midday. The technology sector was the worst hit with losses greater than -1.0%. Shares of Pandora were the worst hit, the jewelry maker down more than -6.0% in early trading, on a downgrade from Morgan Stanley.

The UK FTSE was leading the indices lower with a loss -0.83%. The UK is facing a critical Brexit vote this week that could make-or-break the EU economy. The outcome of the vote, whether Parliament would approve Theresa May’s Brexit deal, is in question. May has said that a failure to ratify would be catastrophic. The French CAC was down about -0.70% in midday trading, the German DAX about -0.55%.

Earnings Season Kicks Off In The US

US indices were down moderately in the early pre-opening session on fear the longest government shutdown in history would impact economic activity. The NASDAQ Composite was leading with a loss near -1.0% while the Dow Jones Industrial Average and S&P 500 were both indicated to open lower by -0.75%. The shutdown is a concern but history shows there were no lingering economic effects from past shutdowns.

In business news, the earnings season kicks off with a report from Citigroup before the bell. The banking and credit giant reports revenue fell short of expectations on weakness in bond trading. The weakness -39% for fixed-income revenue, was much more than expected and offset gains in all other segments. Later this week traders will be looking for reports from JP Morgan, Wells Fargo, Bank of America, and American Express.

There was no economic data on Monday. The US Producer Price Index will be released on Tuesday, retail sales on Wednesday and key real estate data throughout the week.