Chinese Export Data Lifts Equities; Europe Falters As ECB Keeps Rates On Hold

[Chart courtesy of MarketWatch.com]

US stocks advanced for a second straight day, sending the S&P 500 to a fresh five-year closing high after exports data from China bolstered the view the global economy is on the mend.

China’s December exports surged 14.1 percent from a year earlier, almost triple the 5 percent growth projected by analysts and well ahead of the 2.9 percent gain recorded in November. Imports also grew by a comparatively modest 6 percent from the final month of 2011, boosting trade surplus for December.

Investors also contemplated the latest labor market data that showed initial jobless claims rose 4000 to 371,000 in the latest week. A separate report showed inventories at US wholesalers grew by 0.6 percent in November, which was higher than economists had estimated.

None of these two items mattered as the indexes got their usual afternoon lift, which has been the theme for quite some time in this centrally planned market environment. Negative reports are ignored, and the indexes continue to rise with no regards to underlying fundamentals. It sure makes me wonder how long this can continue…

The European Central Bank left rates unchanged at its latest policy meeting Thursday and said the euro-area will allegedly return to growth in 2013 as the region’s bond markets stabilized after three years of turmoil.

Treasury prices fell for the first time in five days, pushing yields up as signs of growth in China and the European Central Bank’s optimistic outlook diminished demand for safer assets.

The US dollar meanwhile dropped Thursday after euro rose the most since September following ECB President Mario Draghi’s comment that a gradual recovery should start later this year. Draghi’s upbeat forecast about the economy was taken as a signal that the central bank would hold off on any additional rate cuts in the near future.

European stocks witnessed mixed price action Thursday after the European Central Bank and the Bank of England policy makers left interest rate unchanged at a record low.

The Stoxx Europe 600 index fell 0.3 percent after closing at its highest level since Feb 2011 yesterday.

Spain was in the spotlight Thursday after the Treasury sold 10-year Spanish government bonds at lower yields compared with previous auctions. 10-year Spanish yields fell to 4.89 percent in the secondary market, the lowest in 10 months.

Our Trend Tracking Indexes (TTIs) edged higher and have reached the following positions above their respective long-term trend lines:

Domestic TTI: +2.66%

International TTI: +10.35%

I like to point out that in the 25 years that I have used these TTIs, I have never seen the International one take off literally on a vertical course and reach a level above 10%. This is simply not a healthy move and can’t go one forever.

You can see the latest chart in the StatSheet, which I will post a little later on.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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