Our typical jaunt round the globe begins in Japan, where last night at 6:50 PM EST their Merchandise Trade figures were released. This is more or less the same thing as the US Trade Balance figures, and looks at the trade deficit or surplus on tangible goods and services. The consensus estimate was for a surplus of ¥450 billion in December (up substantially from November's ¥151.1 billion). Analysts were also looking for annual imports to hit a 9.5% increase, while imports were expected to increase 12.3%. In actuality, the December trade surplus was ¥727.7 billion (whupping estimates), while 2010 exports finished up 13.0% and imports finished up 10.5%.
The Japanese markets would be far happier about this if Standard & Poor's hadn't cut their long-term sovereign debt rating to AA-.S&P's reasoning is that "In our opinion, the Democratic Party of Japan-led government lacks a coherent strategy to address these negative aspects of the country's debt dynamics, in part due to the coalition having lost its majority in the upper house of parliament last summer." The yen dropped and credit default swaps widened on the news.
In further Asia-related news, Representatives Sander Levin, Tim Ryan and Tim Murphy are planning to reintroduce the Currency Reform for Fair Trade Act when the House returns in February. This act would allow the Commerce Department to treat undervalued currency as a subsidy under US trade law. This would allow companies to seek higher duties against imports from the nation with the undervalued currency if those imports compete with US production.
In addition, the China Securities Regulatory Commission has drafted a consultation paper outlining rules that will allow qualified foreign institutional investors to invest in the Chinese stock index futures market. The investments can only be used as a tool for hedging, not for arbitrage or speculation, and the QFIIs will not be allowed to issue derivative products on the stock index futures.
Turning to Europe, German CPI was released at 8:00 AM EST. For January 2011 the consensus expectation was to see CPI fall 0.4%, and it beat expectations by falling 0.5%.
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