China is not exporting as much as they used to: Imports and exports were both lower than expected in September, as the trade surplus was much smaller than August and July. This seems pretty clearly linked to the slower global economy — exports to the European Union, for example, were half that from the prior month.
Chinese officials would no doubt like to blame some of the weakness on a slightly stronger currency. The U.S. Senate just passed a bill that would impose tariffs on China if they did not nudge the yuan higher. Bottom line: this will put pressure on China to weaken its currency and will increase tension with the U.S.
By the way, the trade surplus with China has not changed, it was $20 billion in September, about the same as August.
The Chinese are in a tough position: inflation remains relatively high at 6.2 percent in August, so they will not easily be able to cut interest rates, but they can do stimulus: China announced yesterday plans to help small- and medium-sized businesses to access credit. Many have been cut out of the credit market as the Chinese have raised rates and tightened standards.
1. European banks and European stocks in general are weaker this morning. There was an interest comment from European Central Bank officials in their monthly report about the whole debate on how much of a "haircut" private investors should take in connection with their holding of Greek (or other sovereign) debt: "The ECB has strongly advised against all concepts that are not purely voluntary of that have elements of compulsion, and has called for the avoidance of any credit events and selective default or default." They warned that the reputation of the euro was at stake.
2. Italy sold 6.2 billion euros in bonds with varying maturities. That's the good news, it came off. The bad news is: a) it was less than they sought to sell; and b) the 10-year bond yields are about 5.80 percent, the highest in several months.
3. JPMorgan Chase third-quarter earnings beating estimates on the top and bottom line, though earnings were lower than the same period last year. As expected, investment banking and trading fell sequentially. JPMorgan’s CEO Jaime Dimon saying on the conference call that he was confident the bank can manage through the European debt crisis.
4. Beazer Homes said it would see a jump in fourth-quarter orders and closings, suggesting an improvement in the housing market after a prolonged slump. The home builder saying July-September orders rose 33 percent from last year on a preliminary basis.
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