Wednesday, February 10, 2010

International Trade Update- 2/10/10

Via Bloomberg:

The U.S. trade deficit unexpectedly surged. But it is all about higher oil prices and restocking oil inventories. The overall U.S. trade deficit ballooned to $40.2 billion from a revised $36.4 billion gap in November. The December shortfall came in much worse than the market forecast for a $35.7 billion differential. Exports, however, rose 3.3 percent while imports jumped 4.8 percent. The worsening in the trade deficit was largely due to a widening of the petroleum deficit, which came in at $23.5 billion and up sharply from a differential of $19.9 billion the previous month. This was due to both higher prices and increased barrels imported. The non petroleum gap actually shrank to $26.9 billion from $27.2 billion in November.

Earlier weakness in the dollar and Asian economic growth continue to boost the trend in U.S. exports. Year-on-year, overall exports in December rose to plus 7.4 percent from minus 2.4 percent in November. Of course, a low base for the comparison helps. Meanwhile imports increased to up 4.6 percent from down 5.6 percent the month before. Despite the low base starting point, it is clear that international trade – exports and imports – is recovering.

The headline number for the December deficit is scary. But seeing that the non-oil deficit actually contracted indicates that the trade picture may actually be improving after swings in oil imports are discounted. The jump in oil imports likely will reverse next month. And exports are still on an uptrend. Nonetheless, the widening of the trade gap is bad news for the dollar.

The United States Economy maintains a foaming appetite for petroleum products. However, I am encouraged to see the non-petroleum gap shrink marginally. All things considered this report was a wash.

Equities sold off early in the trading session as $ strength continued. However gains have been paired and the S&P is now positive by 1/10th of a percent@ 1071.

P.S. No trading for me today or tomorrow. I am taking the next 2 days of "stormagedon" to research the current issues at hand and plan out my strategies for the upcoming trading sessions. Chinese Philosophy will be read.

Patrick M. Ambrus
Managing Partner
Analyze Capital LLC

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