President Trump and Prime Minister Abe tee off; OPEC toes the line; China trade rises; Greece goes back for more.
"You get to know somebody better on a golf course than you will over lunch."
Japan trade: Timing trumps everything As background for this past weekend's first meeting between Japan's Shinzo Abe and President Donald Trump, last month's figures showed Japan with a trade surplus with the rest of the world: 641.1 bn Japanese yen ($5.77 billion), nearly three times consensus expectations. Exports rose 5.4%, the first annual rise in over a year, while imports slumped 2.6%. The country's trade surplus with the U.S., however, amounted to $68.9 billion, the second largest with any country.
Crude: OPEC stays the course To the surprise of skeptics, January 2017 saw the cartel achieve 90% initial compliance with its self-imposed production cutbacks, even in the face of stronger-than-expected global demand. According to the International Energy Agency's report on February 10, Kuwait, Saudi Arabia, Qatar and Angola all cut back more than their allotment required. To little surprise, Venezuela showed the least compliance (20%), possibly due to its ongoing economic crisis and the resultant shortage of foreign exchange, or its need to comply with contractual agreements with China, its largest customer. West Texas Intermediate and Brent crudes traded up on the news, reaching $53.85 and $56.62 respectively.
China: Exports, imports jump January saw exports jump 7.9% year-on-year, reversing December's 6.1% decline and beating expectations. Imports rose as well, by a better-than-expected 16.7% vs. December's 3.1% rise. The net effect: an overall trade surplus with the rest of the world of $51.35 billion, the highest level since August, and up from December's of $40.82 billion. The export figures reflected a pickup in global demand, while the import figures reflected higher commodity prices and inventory restocking. At the same time, January saw the country's foreign exchange reserves fall slightly to $2.998 trillion, the first time below $3 trillion since February 2011.
Greek bailout: Splitting the difference Disagreement among the International Monetary Fund (IMF), the European Commission (EC) and the European Central Bank (ECB) over Greece's compliance with the latest stage of its bailout are casting a pall over Europe's sovereign debt markets. The IMF has been the holdout, demanding – with Germany's support – that Athens raise taxes and reduce social benefits yet again, to reach its goal of a primary budget surplus (excluding debt service), of 3.5% of GDP. The three creditors have stated their interest in presenting a united front to Greece's Finance Minister, but it's unclear that the terms to which they will agree will be acceptable to its counterparty.
U.S. inventories: Wholesale lows At December's run rate, unsold goods on hand at wholesalers would last 1.29 months, the leanest level in two years, according to the Commerce Department. December also saw purchasers at wholesalers jump 2.6% month-on-month, the highest monthly rise since mid-2011. These figures suggest manufacturers are placing more orders for anticipated production, and could themselves be in place for record sales. Inventories are notably low for furniture manufacturers (1.43 months, lowest since April 2006) and hardware wholesalers (1.96 months, lowest since October 2014).