Chinese statistics again sent a shudder through global markets halting rallies in commodities and equities and giving bonds and the yen new life.
Mainland exports plunged 25.4 percent in the year to February, a historical collapse second in magnitude only to February and May 2009 at the height of the financial crisis. It was the eighth negative month in a row for China's chief economic engine and the 11th monthly decline in the last year. Economists had forecast a 14.5 percent decrease following January's 11.2 percent decline. Imports fell 13.8 percent, the 16th straight decline though an improvement on January's 18.8 percent drop.
Equities tumbled around the world, ending a five day rally. In Asian the Nikkei lost 0.76 percent, the Hang Seng in Hong Kong shed 0.73 percent and the Seoul Kospi was down 0.60 percent.
Paradoxically the mainland exchanges managed to stem the tide, with the Shenzhen Composite rising 0.51 percent and the Shanghai adding 0.14 percent as the export debacle make it more likely that Beijing will move to support the economy with direct fiscal stimulus.
Europe followed Asia showing red across the board and ending its five week rally. Markets in London, Frankfurt, Paris and Madrid all lost between 0.5 percent and 1.0 percent with the UK’s FTSE off the most at 0.92 percent.
By mid-day U.S. markets had recovered from their worst levels. At 12:24 the Dow was down 32.42 points, 0.20 percent at 17,040.53 having been lower by as much at 152 points. The S&P 500 was down 0.53 percent, 10.64 points at 1991.12 at 12:26 pm EST.
The MSCI Emerging Markets Index reversed falling 0.6 percent, the first loss in eight sessions.
Industrial metals fell, led by iron ore, as did crude oil. Generic West Texas Intermediate sank 2.96 percent, $1.12 to $36.78 at 12:38 EST after having touched $38.39 earlier in the day, a two month high. China accounts for about 40 percent of the global demand in industrial metals.
Brent, the European standard was trading at $39.94 down $0.90, 2.2% at 12:39 pm in New York.
The Bloomberg Commodity Index which has rallied 8.5 percent since its record low of 72.3315 on January 20th, was off 1.10 percent at 78.4216 at 1:07 pm EST.
The Japanese Yen was the chief beneficiary of the safety flows from the renewed doubt about the health and future of the Chinese economy. It rose against all of its major trading peers.
The yen was exchanging at 112.55 in New York at 12:45 pm EST, within points of its earlier 112.43 high, a six session top.
On February 11th the yen had reached 110.99, a 12 month high against the U.S. Dollar, despite the recent move in Japan to limited negative interest rates. The Bank of Japan is attempting to revive the flagging yen devaluation of the government’s economic program. In June last summer the yen had touched 125.86 a more than twelve year low.
Investors were using those newly acquired yen to buy Japanese government bonds. The yields on the generic 10 years JGB fell to -0.099 percent a record.
In Germany the return on the generic 2 year Bund fell 2.73 percent, 1 basis point to -0.565 percent.
In the U.S. Treasuries rose and yields plunged. The generic 10-year Treasury had lost 9 basis points at 12:29 pm to 1.8183 percent. The 2 year was down 4 points in yield at 0.8619 percent.
Bond prices had fallen steadily for past three weeks, after the 2 year touched a low of 0.6499 percent on February 11th and the 10-year reached 1.6590 percent on the same day.
Gold was the exception to the general market turn to safety, though this traditional haven has had a powerfully rally this year.
The precious metal was priced at $1264.99 the ounce at 12:59 pm, down 0.18 percent $2.33 on the day, Gold had been as high at $1278.20 in European trading, just shy of the 13 month top at $1279.88 last Friday. Gold has gained 19.2 percent this year, since the close on December 31st at $1061.44.
Chief Market Strategist
WorldWideMarkets Online Trading