The negative sentiment that permeated throughout the North American trading session yesterday has filtered through to Asian markets, with participants bidding up demand for perceived safe-havens while rotating out of higher-yield investments. The blood-bath for commodity-linked currencies has yet to reach a conclusion, with the aussie and loonie both taking an additional leg lower against the big dollar despite front month WTI stabilizing for the time being. The culprit of the continued pessimistic sentiment were the trade balance figures released from China overnight, where the trade surplus for November coming in narrower than expected, with exports sliding by more than anticipated. Both imports and exports fell on a year-over-year basis, but the total value of imports shrunk by less than what had been registered in October coming in with a print of -8.7%. With export volumes continuing to struggle and warning of sluggish global demand, it increases the likelihood of policy response from the People’s Bank of China, especially if inflation remains well contained as referenced by the CPI numbers due out tomorrow. November’s smaller than expected trade surplus have kept pressure on commodity producing regions, with the loonie hitting new multi-year lows, while the Shanghai Comp shed close to 2% of its value.
Continuing on with developments in Asia, Japanese economic growth for the third quarter was revised out of contractionary territory, helping Japan skirt the technical definition of recession as a bump in capital expenditures helped GDP growth expand by 1.0% on an annualized basis. A rise in inventories tempered some of the enthusiasm over the upward revision to the GDP statistics, but it does help support policymakers view in the region that the economic climate is slowly progressing towards policy targets. Despite the Japanese economy moving at a standstill pace when factoring in the 0.5% contraction in the second quarter, we continue to believe policymakers focus will lean towards adjustments fiscally as opposed to further monetary policy actions, as demographic shifts within the economy keep a lid on the outlook for potential growth. The Nikkei finished its session down 1% on the day, while the yen found some buying interest which helped it strengthen marginally against the American buck.
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