Financial Market Review for April 13, 2018 China’s exports growth unexpectedly fell in March, the first drop since February last year, raising questions about the health of one of the economy’s key growth drivers even as trade tensions rapidly escalate with the United States. March import growth beat expectations, however, suggesting its domestic demand may still be solid enough to cushion the blow from any trade shocks. That left China with a rare trade deficit for the month, also the first drop since last February. The latest readings on the health of China’s trade sector follow weeks of tit-for-tat tariff threats by Washington and Beijing, sparked by U.S. frustration with China’s massive bilateral trade surplus and intellectual property policies, that have fueled fears of a global trade war. China’s March exports fell 2.7 percent from a year earlier, lagging analysts’ forecasts for a 10.0 percent increase, and down from a sharper-than-expected 44.5 percent jump in February, which economists believe was heavily distorted by seasonal factors. For the first quarter as a whole, however, exports still grew a hearty 14.1 percent. Economic data through the Asian session this morning included New Zealand’s March Business PMI, the release of the RBA’s Financial Stability Review and China’s March trade figures. For the Kiwi Dollar, March’s business PMI slipped from 53.4 to 52.2. The manufacturing sector saw the pace of growth slow in March, making it a 2nd consecutive fall in the PMI in the 1st quarter and a sizeable fall from last November’s 61.0 March’s fall was attributed to growth in production easing, with the production sub-index falling from 53.7 to 50.8. Other falls were seen in the employment sub-index, down from 54.6 to 53.5 and new orders down 0.4 points to 53.8, while finished stocks and deliveries saw a pickup in growth at the end of the 1st quarter. The Kiwi Dollar moved from $0.73779 to $0.73788 upon release of the figure, with the Kiwi Dollar in a holding pattern through the session, down 0.03% to $0.7374 at the time of writing. For the Aussie Dollar, the RBA’s financial stability review focused more on household debt and the risks that rising interest rates could pose to domestic consumption and economic growth prospects. The review served as a warning, with the RBA noting that recent economic growth and surge in asset prices have left investors failing to consider the possible implications of a correction, investors having taken on more risk in recent years, exposing themselves to more significant losses. On the positive side, the RBA noted that household stress was not so widespread, though some households could be tested should there be a deterioration in labour market conditions.
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