China trade balance consolidates, commodities extend gains

China’s May exports rose 1.2% year on year in yuan terms, but were down by 4.1% in US dollar terms due to a 5.5% currency depreciation.

China’s May exports rose 1.2% year on year in yuan terms, but were down by 4.1% in US dollar terms due to a 5.5% currency depreciation.

Chinese exporters are facing the headwind of rising wages and a relatively strong yuan, making them less competitive. The weakness in exports also shows that the external demand remains soft. This might limit the options of policymakers eager to keep stimulus measures in place.

Imports rose 5.1% in yuan terms, or fell -0.4% if translated into US dollar terms, beating expectations of a 6% decline. This is on the back of rising commodity prices, especially that of crude oil.

Strong crude oil prices sent Singapore stocks higher. The Straits Times Index rose 0.6% on Wednesday, with O&G names outperforming. Ezra (+25%), Sembcorp Marine (+6.6%), Sembcorp Industry (3.2%) and Keppel Corp (+1.5%) rallied for a second day as WTI oil broke out above $51.5 mark for the first time in eight months.

The Hong Kong market will be closed today for the Tuen Ng Festival. Shanghai and Taiwan markets will be closed both today and on Friday.

Commodities
As mentioned above, the WTI crude oil price climbed further, to $51.5 for the first time in eight months. The US DoE weekly data shows that the commercial crude oil inventory has dropped by 3.22 million barrels last week, above expectations. The inventory has been dropping for three consecutive weeks, showing that the supply-demand relationship has leaned towards a balance.

Gold prices surged to $1,264, with the immediate support and resistance levels at $1,240 and $1,286 respectively. Silver also advanced to $17.10. Demand for safe-haven assets rose as we are approaching the date of the ‘Brexit’, an event causing much uncertainty.

FX
The Dollar Index slid further to the 93.49 area, as the market is now expecting a slower pace as regards rate hikes. USD/JPY traded lower at the 106.70 area this morning, with the immediate support and resistance levels at 105.60 and 108.00 respectively.

EUR/USD climbed to the 1.1390 area as the US dollar weakened. USD/SGD softened further to 1.3480 this morning. In the short term, a strong support level could be found around the 1.3400 area, with the resistance level at the 1.3800 area.

Silver - Cash

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