Markets shift to neutral

Financial markets look to be shifting into neutral gear ahead of heavyweight data starting with China’s Trade Balance, US CPI this evening, and the start of earnings season in the US, led by big banking. Wall Street went nowhere overnight, the US 10-year note auction passing without incident, leaving bonds in neutral gear as well. It was much the same for currency markets, although gold retreated as momentum temporarily waned, and bitcoin continued to nudge near record highs.

In Asia today, China and Japanese equity markets have rallied, having suffered most yesterday. South Korea has also jumped. With no news of note, that suggests that fast money flows suffering a bout of nerves yesterday, took the overnight session as no news is good news, and loaded up again this morning in typically herd-like behaviour.

China trade surplus slides

The first surprise of the day is from the China Balance of Trade for March. In US dollar terms, the surplus collapsed to USD13.8 bio versus an expected surplus of USD52.0 bio. Exports increased in March YoY by 30.60% versus 35.50% exp. The real surprise is March Imports YoY, surging 38.10% higher versus 23.30% exp. Imports rose across the board, led by steel and industrial metals, natural gas and crude oil, and notably, mechanical and electrical products and meat, both of which increased by over 25.0%.

Imports rose impressively by over 25.0% from across Asia, but notably, they rose 41.0% from Taiwan, 32.30% from the EU, and a massive 66.30% from the US. The latter suggests that China may be trying to play catch up with its requirements from the Trump-era trade deal. The immediate impact is negative, but looking into the numbers, one can cut the cake both ways. On the one hand, we could take the export data as a sign that the pace of China’s export-led recovery is hitting a post-Covid peak. But the import data suggests that both the export and domestic sector are firing on all cylinders.

The headline number will probably send shivers through investors initially. But the impressive import numbers from Asia will be a plus for the regional recovery. Overall, once the initial kneejerk has passed, both China and Asian markets should regain their poise. Even if the China export machine is slowing, and the last year was exceptional for several obvious reasons, if domestic consumption is driving imports, that recovery should earn China a pass mark.

Looking ahead, we have the usual plethora of Federal Reserve speakers this evening, but the most attention will be focused on US inflation releases. US Core and Headline Inflation for March YoY are expected to rise by 1.50% and 2.50%, respectively. However, the MoM data is arguably more critical, with March encompassing the economy’s initial reopening and some of those stimulus cheques being spent. March Core Inflation MoM is expected to rise by 0.20%, with the headline inflation rising by 0.50%.

Markets have become complacent about the inflation question, likely because the equity rally resumed with major indices hitting record highs in the US and Europe, justifying it as the street becoming more “comfortable” with rising inflation. We will see how “comfortable” markets really are if the MoM CPI prints are much higher than expected. I suspect bond yields will jump along with the dollar in that event, with the Nasdaq and S&P 500 darlings of 2020 getting cyclically rotated for the Dow Jones pensioners.

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at Visit to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was OANDA’s Senior Market Analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

Latest posts by Jeffrey Halley (see all)