Overview: Equity markets are stabilizing today as Asian and European markets shrug off the failure to get traction in the US yesterday. As everything and nothing was behind the dramatic sell-off in recent days, the same could be said about today’s recovery. Most accounts seem to be emphasizing two developments: a report indicating that despite the talk earlier in the week, there is a recognition by the US Treasury staff that China’s actions do not reach the threshold of manipulation, and signs that the US tariffs were not having much impact on Chinese trade through last month. Bond markets are narrowly mixed, and although both chambers of Italy’s parliament approved the fiscal outline, the bond market is firmer, and premium over Germany has narrowed by a few basis points. The US 10-year yield is firmer, but at 3.16% it is still off six basis points on the week and if sustained could be the first rise in the rate this week. Oil prices are firmer after falling around 5.5% over the past two sessions. The Norwegian krone and Canadian dollar are exceptions to the US dollar’s firmer today against most of the major currencies. Among emerging market currencies, the Chinese yuan eased, but Asian currencies generally moved higher, led by Korea and Taiwan. The South African rand is also gaining ahead of Moody’s credit review later today (currently Baa3 with stable outlook). The Singapore dollar eased slightly even though the Monetary Authority tightened policy for the second time this year (only two meetings a year).  

China reported a $31.7 bln September trade surplus. The median forecast in the Bloomberg survey was for a $19.2 bln surplus after a $26.65 bln surplus in August (which represents a small revision from the initial estimate). The larger than expected surplus was a function of both stronger exports and slower imports. Of note, crude oil imports fell by 3%, copper ore imports were record levels, while iron ore imports rose almost 5%. Soy imports fell 12%. Aluminum exports fell 2.5%.  Many are reading the strong trade data as China’s resilience in the face of the first round of US tariffs (on $50 bln of Chinese goods). The second round (10% on $200 bln of Chinese goods) did not go into effect until late September (September 24th). We suggest drawing more tentative conclusions from the trade data as there was likely some increased activity to beat the tariffs from both Chinese producer side as well as the American importers, as this appears to be reflected in the US inventory data.