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Pre-market briefing: China trade data creates more uncertainty

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UK Market Snapshot 

UK markets finished higher yesterday, after the International Monetary Fund lifted its economic growth projections for the UK. Vedanta Resources and Royal Bank of Scotland Group surged 8.5% and 5.4%, respectively, following broker upgrades. The FTSE 100 advanced 1.0%, to close at 6,513.1, while the FTSE 250 rose 1.0%, to settle at 14,620.6. 

US Market Snapshot 

US markets closed higher yesterday, as better than expected start to the US corporate earnings season lifted investor sentiment. The DJIA rose 0.5%, to settle at 15,300.3, while the NASDAQ advanced 0.6%, to close at 3,504.3. The S&P 500 gained 0.7%, to settle at 1,652.3. 

Europe Market Snapshot 

Other European markets finished higher yesterday, after euro area policy makers reached an agreement on providing further assistance to Greece and following a positive start to the US corporate earnings season. The German DAX Xetra 30 rose 1.1%, to close at 8,057.8, while the French CAC-40 advanced 0.5%, to settle at 3,843.6. 

Asia Market Snapshot 

Markets in Asia are trading mostly higher this morning, however, gains are limited amid unexpected decline in Chinese export data. The Nikkei 225 index is trading 0.1% higher, at 14,489.9. Hang Seng index is trading 0.5% up, at 20,775.4, while the Kospi index is trading 0.2% lower, at 1,827.1. 

Commodity, Currency and Fixed Income Snapshots 

Crude Oil 

At 0330GMT today, Brent Crude Oil one month futures contract was trading 0.07% or $0.08 lower at $107.73 per barrel, following dismal Chinese trade data. Yesterday, the contract advanced 0.35% or $0.38, to settle at $107.81 per barrel, after the American Petroleum Institute reported that the US crude oil inventories declined 9 million-barrels for the week ended 5th July. 

Gold 

At 0330GMT today, gold futures contract was trading 0.08% or $1 lower at $1244.9 per ounce. Yesterday, the contract rose 0.89% or $11, to settle at $1245.9 per ounce. 

Currency 

At 0330GMT today, the EUR was trading at $1.2776 against the USD, marginally losing 0.01%, ahead of German consumer price index data to be released later today. Yesterday, the EUR weakened 0.65% versus the USD, to close at $1.2777, after the ECB Governing Council member, Joerg Asmussen stated that that the central bank would maintain low interest rates for an “extended period” extended beyond 12 months and as IMF growth prediction for the Euro-zone was slashed to 0.3% from 0.6%. 

At 0330GMT today, the GBP strengthened against the USD, gaining 0.13%, to trade at $1.4866. Yesterday, the GBP weakened against the USD by 0.58%, to close at $1.4847, after the UK’s manufacturing production and industrial production came below market expectations in May and as UK’s trade deficit widened more than market expectations in May. 

Fixed Income 

In the US, long term treasury prices and yields remained mostly unchanged, ahead of the FOMC minutes and US Federal Reserve Chief Ben Bernanke’s speech scheduled later during the day. Yesterday, yield on 10-year notes remained unchanged at 2.65%, while yield on 2-year notes remained unchanged at 0.37%. Meanwhile, 30-year bond yield increased 1 basis point to 3.64%.  

Key Economic News 

UK GDP grew in the three months to June, indicates NIESR 

The National Institute of Economic and Social Research (NIESR) Gross Domestic Product (GDP) estimate in the UK, for the three months ending June, indicates an economic growth of 0.6%, following a same rate of rise recorded in the three months ended May. 

UK trade deficit widened in May 

Total trade deficit in the UK widened to £2.435 bn in May, compared to a revised deficit of £2.073 billion reported in the previous month. Visible trade deficit also widened to £8.491 billion in May, compared to a revised deficit of £8.430 bn recorded in April. Additionally, Non EU total trade deficit widened to £4.093 bn in May, compared to a revised deficit of £3.428 bn recorded in April. 

UK industrial production remained flat in May 

On a month-on-month basis, industrial production in the UK remained flat in May, following a downwardly revised fall of 0.1% recorded in April. Market had expected the industrial production to rise 0.2% MoM in May, in line with the 0.1% rise originally estimated. On an annual basis, industrial production fell 2.3% in May, following a downwardly revised 1.4% drop recorded in April. 

UK manufacturing output fell unexpectedly in May 

On a month-on-month basis, manufacturing output in the UK fell 0.8% in May, marking its second consecutive monthly decline and following a 0.2% fall recorded in the previous month. Market had expected the manufacturing output to rise 0.4% MoM in May. On an annual basis, manufacturing output fell 2.9% in May, compared to a downwardly revised decline of 0.9% recorded in April. 

US small business optimism fell unexpectedly in June, indicates NIFB 

The NIFB Small Business Optimism Index in the US fell to a reading of 93.5 in June, compared to a reading of 94.4 recorded in the previous month. Market had expected the business optimism to rise to a reading of 96.2 in June. 

IMF cuts global growth outlook as emerging markets slow 

The International Monetary Fund (IMF) trimmed its global growth forecast for the fifth consecutive time since early last year due to weakening emerging economies and deepening euro-zone contraction. The IMF has lowered its growth forecast for 2013 to 3.1%, from 3.3% projected in April and also trimmed its forecast for 2014 to 3.8%, from 4.0% forecasted earlier. 

Chinese trade surplus widened slightly less-than-expected in June 

The trade surplus in China widened to $27.12 billion in June, following a revised $20.42 billion surplus recorded in the previous month. Market had expected the trade balance to record a surplus of $27.75 billion in June. Moreover, on a year-on-year basis, the exports fell unexpectedly by 3.1% in June, following a 1.0% rise recorded in May, and well below the forecast of a rise 3.7% YoY in June. Additionally, imports also fell 0.7% in June, following a 0.3% decline recorded in May. Market had expected imports to rise 6.0% YoY in June. 



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