If the market had anything else to look up to, it would likely
have ignored the news about China's export shortfall or the
ongoing Ukraine-Russia standoff. But markets don't have anything
else going on at present - the Q4 earnings season is now in the
rear-view mirror and we don't' have much on the economic docket
either. This data void appears to be making it difficult for the
market to sustain its recent positive momentum.
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We shouldn't put too much stock in any one economic data point
coming out of China, particularly the export numbers given how
exposed the country's export account is to over- and
under-invoicing by exporters. This manipulation of the export
numbers, which was reportedly a big deal in the year-earlier
period, is a direct result of the non-convertibility of the
Chinese currency. Then there is the issue of Lunar Year, which
always tends to have a distorting effect on data.
But beyond all of this, an -18.1% drop in Chinese exports would
imply a sharp drop off in demand for the country's products
elsewhere. But we know that's not the case as the economic
outlook for the U.S., European, and even Japanese economies has
been fairly stable. Bottom line, there are legitimate questions
about China's growth outlook that have been around for quite some
time. Other recent economic indicators like inflation, purchasing
managers' surveys and industrial production data have also been
pointing towards some loss of momentum, but not to the extent
implied by the export shortfall.
The market came back really strong from the January sell-off,
with the broad market indexes essentially at record levels. But
stocks don't go straight up all the time and the current lack of
a directional thrust in a low-news backdrop is hardly unusual.
With not much on the data docket over the coming days, we
shouldn't expect much from the market either.