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business newsGlobal Trade Data Suggest US Growth Surge
By
James Kostohryz
Apr 01, 2010 1:50 pm
Increased exports from China, Japan, Korea, and Europe mean it's time to strap on our helmets.
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A few highlights:
1. China’s imports have been surging at a torrid pace: 45% year-over-year growth in February. Many analysts have been distracted by this figure and have used it in support of the notion that China’s trade deficit is closing and that a revaluation of the RMB isn't required. This is silly. The dip in the Chinese trade surplus is merely the squat before the leap. China imports most of its primary and many of its intermediate goods for its export industry. This means that surging imports are merely a prelude to surging exports.
2. China export orders surging. The thesis that surging imports were simply a prelude to booming exports gained credence today with the release of China’s official PMI. Export orders surged higher in March from 50.3 to 54.5. Furthermore the HSBC PMI, which was already booming at 58.3, expanded further to 58.4.
3. Japan export orders booming. The Nomura/JMMA Japan Manufacturing Purchasing Managers Index (PMI) report indicated that the new export orders index, a leading indicator of Japanese exports, rose to 55.7 from 55.2 in the previous month. This is the highest level recorded for this index since May 2004. Coincidentally, this was a time when US GDP started to accelerate sharply.
4. Korea imports and exports accelerating. Imports soared 48% year-over-year, compared to just 36% recorded for the first 20 days. Again, this is a leading indicator of export growth. March exports were up 35% year-over-year. Based on the import figures, expect export figures to spike above 45% in the next few months.
5. Europe export orders explode upward. Europe’s manufacturing purchasing managers’ index for new export orders is near an all-time high since figures collected in 1995. Germany, Europe’s leading exporter, recorded its highest overall PMI acceleration in the history of the series.In case you didn’t know, the US is the largest export customer for all of these countries. So, unless you think these foreign-based statistics are rigged, this is as strong an indication as can exist of the fact that US demand is gathering massive steam.
Strap on your helmets folks, as US growth is about to take off and things in the US and global financial markets are about to get whacky.
As reported yesterday, I’m studying investment options such as: Long SPDR S&P 500 (SPY), PowerShares QQQ (QQQQ), and iShares Russell 2000 Index (IWM). Short SPDR Barclays Capital 1-3 Month T-Bill (BIL), iShares Barclays 1-3 Year Treasury Bond (SHY), or iShares Barclays 20+ Year Treas Bond (TLT). Long UltraShort 7-10 Year Treasury ProShares (PST), UltraShort 20+ Year Treasury ProShares (TBT). Long SPDR Barclays Capital High Yield Bond (JNK) and iShares iBoxx $ High Yield Corporate Bd (HYG). Long PowerShares DB US Dollar Index Bullish (UUP). Old favorites such as Apple (AAPL) and Bank of America (BAC) could fly in such an environment. Investment banks such as Goldman Sachs (GS) and Morgan Stanley (MS) should rock as underwriting activity and M&A heat up. The tech space in general looks very attractive including chips and networking. Economically sensitive cyclical stocks should do well but timing will be key as major events in the bond markets and China loom. Brazil and Asia, excluding China and Japan, look particularly good in the emerging markets space. Finally, gold-based investments such as SPDR Gold SharesMarket Vectors Gold Miners ETF (GLD) and (GDX) should remain in a sweet spot.
No positions in stocks mentioned.
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