Monday, September 9, 2013
Positive economic growth data out of China and Japan provide a
favorable backdrop for today's trading action as Congress returns
to discuss the Syria issue. We don't have much on the domestic
economic calendar today and the rest of this week, with markets
expected to remain tentative ahead of next week's Fed meeting
that will likely usher in the long-awaited Taper.
Stronger trade and less worrisome inflation data out of China
will likely further raise hopes that the country's growth has
stabilized. China's trade surplus, the difference between exports
and imports, rose to its highest level since January this year.
This reflects strong demand for the country's products,
particularly in the U.S. On the negative side, the less than
stellar growth in imports raise questions about the domestic
demand backdrop. Also the continued momentum in exchange rate and
rising wage growth for Chinese workers relative to other markets
like Vietnam raise questions about the long-term sustainability
of exports growth.
That said, China's growth outlook appears a lot more reassuring
than many of the other major emerging market economies that have
to deal with a less helpful post-QE international financial
backdrop. Countries like India, Brazil, Turkey and others are
facing doubts about their ability to fund current account
deficits, which is weakening their currencies and growth
pictures. The fact that China doesn't have to deal with this
issue is a net positive for the global economy. The outlook
for Japan appears upbeat as well, not only did the country got
the nod to host the 2020 Summer Olympics, but the Q2 GDP was
materially revised higher on better than expected capital
This improved Asian growth picture, coupled with signs of
recovery in the Euro-zone and positive momentum in the U.S.
economy, bodes well for the markets. Sustained economic growth
along these lines should more than make up for higher interest
rates in the post-QE world. We will likely get past the Taper
issue next week, helping the markets focus on these improving
fundamentals going forward.
Director of Research
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