Weak Chinese imports signals dramatic market turnaround

15.19 AEST, Tuesday 10 July 2012

Weak Chinese imports signals dramatic market turnaround

By Ben Taylor (Sales Trader, CMC Markets)

We have seen a reversal of fortune in today’s market as weak Chinese June Import growth failed to meet expectations signalling a dramatic turnaround for our mining heavyweights.

China’s imports rose just 6.3% in the month of June, half of the 12.7% increase expected. The result had the market sell risk assets in dramatic fashion. The unexpected result comes on the back of yesterday’s CPI figure which was much lower than expected.

Yesterday’s CPI and today’s trade balance data suggests China's move towards a consumer driven economy is not working. Friday will bring the release of China’s GDP, expectations are now being made that the number will be in the low sevens.

The trade data sent our currency lower and had investors scrambling for defensive plays. Telcos, utilities, property and healthcare sectors have all outperformed the market today. Telstra has reached a three year high on the back of defensive buying.

The NAB Monthly Business Survey was also released today showing that the recent interest rate cuts have done little to bolster business confidence in Australia.

Also causing concern is the rise in Spanish bond yields overnight with the 10 year crossing the physiological point of no return. While EU finance ministers are once again meeting to address the issue, the expectations remain that a time extension will need to be granted on Spain's budget deficit reduction requirements.
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