Daily Market Report - 13/10/2015

China’s exports and imports fell in September as global demand remained weak, signaling that the world’s second-largest economy continues to struggle into the end of the year. Exports dropped less than some economists had expected. Still, they said the data offered a further indication that China’s third-quarter growth figures set for release next week will likely fall below Beijing’s target of about 7% for the whole year. 

Chinese exports fell 3.7% in September from a year earlier following a 5.5% drop in August. Imports in September fell 20.4% from a year earlier, compared with a 13.8% decrease in August, the customs agency said Tuesday. 

The country’s trade surplus increased to $60.3 billion in September from $60.2 billion in August. The International Monetary Fund expects the world’s economy to grow 3.1% in 2015, its slowest pace since the global financial crisis. That represents a downgrade from the IMF’s 3.3% growth forecast in July.

The risks to the U.S. economy are tilted to the downside, making it important the recovery is nurtured and interest rates are not raised "prematurely," said Federal Reserve Governor Lael Brainard, on Monday. Brainard said there was a risk-management argument to a policy of "watching and waiting." 

The Fed governor refused to discuss the timing of when the Fed would hike rates, but her comments suggest that she likely is in the minority of Fed officials who do not see a rate hike in 2015 according to projections released at the September policy meeting. According to the "dot plot" released after the September policy meeting, four Fed officials did not think the Fed would raise rates this year while 13 others thought a move could happen in either October or December.

This was conflicting with Fed member Lockhart, Who stated that there could be sufficient economic data for the Federal Reserve to consider a rate hike at their meeting later in October but there will be a lot more data on hand in time for the December meeting. Lockhart, a centrist on monetary policy, is a voting member of the U.S. central bank's rate-setting committee this year. He added on Monday that while the U.S. economy was not directly impacted by China's recent economic slowdown, the Fed was closely watching Europe which does have higher exposure and could have a knock on effect across the Atlantic.

The only piece of note concerning the Euro was a speech given by ECB member Yves Mersch stating that it was too early to say whether negative factors such a slowdown in emerging market economies will derail the long-term path of inflation in the eurozone. 

Echoing comments from many of his colleagues in recent weeks, Yves Mersch said it would take longer than previously expected for inflation to return to the ECB's target of almost 2 percent, owing mainly to slower EM growth, a stronger euro and a fall in commodity prices but reiterated that the ECB will use all available instruments to achieve its mandate, most notably referring to further quantitive easing.

Key Announcements

09:30 – GBP – Consumer Price Index – YoY figure expected to remain unchanged at 0%
10:00 – EUR – German ZEW Survey – expected to decrease to 64.9 from 67.5
19:00 – USD – Monthly Budget Statement – expected to increase to $95bn from -$64.4bn