12 March 2012
The US Dollar and Japanese Yen rose as stocks fell amid global economic slowdown fears in Asia. Stock index futures hint more of the same is likely ahead.
Talking Points * US Dollar, Yen Rise on Haven Demand as Stocks Fall in Asian Trade * Chinese Exports Disappointment Tipped as Catalyst for Sentiment Slump * European, US Stock Index Futures Point to More Risk Aversion Ahead
The US Dollar and Japanese Yen outperformed overnight as stocks declined, stocking demand for the go-to safe haven currencies. The MSCI Asia Pacific regional benchmark index fell 0.3 percent, with the newswires chalking up the selloff to Chinese trade data released over the weekend. The East Asian giant reported that exports grew at an annual rate of 18.4 percent, disappointing economists’ expectations of a 31.1 percent increase. Given that China is the world’s largest exporter, the outcome was interpreted to reflect slowing global demand.
We are skeptical of assigning too much significance to the Chinese trade data set however. Although certainly not a positive outcome, it didn’t represent anything particularly new. Indeed, the year-on-year exports growth rate has been trending lower since May 2010. Rather, we suspect the flare-up of risk aversion reflects the gradual return of big-picture fundamentals as the driving force for price action, with the Chinese data acting as a trigger rather than a catalyst in its own right.
With Greek fiasco seemingly in the rearview mirror following last week’s successful PSI outing, investors likely reappraised the landscape only to be reminded of a Eurozone recession slated for this year expected to bring global GDP growth to the weakest since the Great Recession. Friday’sstrong US jobs report offered some support to risky assets after it crossed the wires but seems to have lost its potency already as traders look ahead to